Suppose that Econland adopts a fixed exchange-rate system and pegs the value of its peso to the U.S. dollar. Which of the following statements is true?
A) Econland's government will have a limited capacity to maintain the peg at the current level if the supply of dollars in the foreign exchange market is continually rising.
B) Econland's government will have a limited capacity to maintain the peg at the current level if the demand for pesos in the foreign exchange market is continually falling.
C) Econland's government will have a limited capacity to maintain the peg at the current level if the demand for Econland's products in the world market is strongly rising.
D) Econland's government will have a limited capacity to maintain the peg at the current level if the demand for U.S. products in Econland is sharply falling.
Correct Answer:
Verified
Q239: Q240: Q241: Q242: The current monetary system for conducting international Q243: Suppose that Econland has a fixed exchange-rate