How does a country maintain a fixed exchange rate?
A) By intervening in the foreign exchange markets and buying or selling currency as needed to achieve the desired exchange rate.
B) By forbidding foreign exchange markets to trade currency at anything other than the official exchange rate.
C) By setting domestic interest rates to achieve purchasing power parity as the desired exchange rate.
D) By intervening in import and export markets to achieve the desired current account and exchange rate.
Question 2
If a decrease in the price of gasoline increases the demand for large cars, then
A) gasoline and large cars are substitutes in consumption.
B) gasoline and large cars are complements in consumption.
C) gasoline is an inferior good.
D) large cars are an inferior good.
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