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Scenario: Gizmovia
The Republic of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia) Look at the scenario Gizmovia. If Gizmovia uses foreign exchange controls, it should require licenses to _____ gizmos and _____ dollars.

Question

Quizplus · Accepted Answer

To maintain the exchange rate at $0.50, Gizmovia should control the supply of gizmos and demand for dollars. By requiring licenses to sell gizmos and buy dollars, they can limit the supply of gizmos and increase demand for dollars, thus supporting the desired exchange rate.

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