Saudi Arabia pegs its currency (the riyal, or SAR) to the U.S. dollar. Currently, the exchange rate is SAR3.75 = $US1. Suppose that the Saudi Arabian money multiplier is 1. How does the Saudi Arabian central bank maintain the pegged exchange rate of SAR3.75 = $US1?
A) It sells dollars (for Saudi riyals) in foreign exchange markets whenever the SAR-$US rate falls below SAR3.75 = $US1.
B) It buys dollars (with Saudi riyals) in foreign exchange markets whenever the SAR-$US rate rises above SAR3.75 = $US1.
C) It sells Saudi riyals (for dollars) in foreign exchange markets whenever the SAR-/$US rate rises above SAR3.75 = $US1.
D) It buys Saudi riyals (with dollars) in foreign exchange markets whenever the SAR-$US rate rises above SAR3.75 = $US1.
Correct Answer:
Verified
Q31: Saudi Arabia pegs its currency (the riyal,
Q32: Financial crises tend to happen in pairs
Q33: What results in changes in the domestic
Q34: When maintaining a peg, if the central
Q35: (Table: Mexico's Central Bank Balance Sheet) To
Q37: If the central bank holds no foreign
Q38: A balance sheet for the central bank
Q39: Which method would the central bank NOT
Q40: To maintain the peg, a nation must
Q41: Aruba pegs its currency (the Aruban florin)
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents