3. If interest rates increase in a country with a fixed exchange rate, what will the central bank do?A. Buy the country's currencyB. Sell the country's currencyC. Engage in contractionary fiscal policy4. The United States has floating exchange rates. Suppose there is an increase in inflation in the UnitedStates. What will happen?A. The U.S. central bank will sell U.S. currency so the exchange rate remains constantB. The U.S. central bank will buy Euros so the exchange rate remains constantC. The exchange rate (price of a dollar) will go upD. The exchange rate (price of a dollar) will go down5. Belize uses a fixed exchange rate, with one Belize dollar equal to one half of a U.S. dollar. There is anincrease in U.S. citizens traveling to Belize on vacation. What will the central bank do?A Buy the country's currencyB. Sell the country's currencySell bonds to banksC.

Central bank refers to a financial institution of a nation that is responsible for managing the…

Answered: terest rates increase in a country with…

terest rates increase in a country with a fixed exchange rate, what will the central bank do? A Buy the country's currency 8. Sell the country's currency C. Engage in contractionary fiscal policy

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3. If interest rates increase in a country with a fixed exchange rate, what will the central bank do?
A. Buy the country's currency
B. Sell the country's currency
C. Engage in contractionary fiscal policy
4. The United States has floating exchange rates. Suppose there is an increase in inflation in the United
States. What will happen?
A. The U.S. central bank will sell U.S. currency so the exchange rate remains constant
B. The U.S. central bank will buy Euros so the exchange rate remains constant
C. The exchange rate (price of a dollar) will go up
D. The exchange rate (price of a dollar) will go down
5. Belize uses a fixed exchange rate, with one Belize dollar equal to one half of a U.S. dollar. There is an
increase in U.S. citizens traveling to Belize on vacation. What will the central bank do?
A Buy the country's currency
B. Sell the country's currency
Sell bonds to banks
C.

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