Suppose that the country of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current equilibrium exchange rate for the gizmo is $0.75. If Gizmovia uses exchange market intervention to decrease the value of its currency to $0.50, it should ________ gizmos and _____ dollars in the foreign exchange market. A)sell; buy B)buy; buy C)sell; sell D)buy; sell

Exchange market:The Gizmovia country wants to maintain the gizmo exchange rate at $0.5, but the…

Answered: Suppose that the country of Gizmovia…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter36: Exchange Rates And Financial Links Between Countries

Section: Chapter Questions

Problem 9E

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Suppose that the country of Gizmovia wants to maintain the exchange rate of its currency, the gizmo, at $0.50, but the current equilibrium exchange rate for the gizmo is $0.75. If Gizmovia uses exchange market intervention to decrease the value of its currency to $0.50, it should ________ gizmos and _____ dollars in the foreign exchange market.
	A)	sell; buy
	B)	buy; buy
	C)	sell; sell
	D)	buy; sell

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