1. When countries seek to maintain fixed exchange rates through intervention, their governments or central banks:

never have to intervene in currency markets because the exchange rate is fixed.

may have to stop printing domestic currency.

must buy domestic currency when foreign demand for their currency increases.

must sell domestic currency when foreign demand for their currency increases.

2. Licensing systems that limit the ability of individuals to buy foreign currency are:

I. floating exchange rate regimes

II. foreign exchange controls

III. exchange market interventions

I only

II only

III only

I, II, and III

3. 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 $0.40. If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.75, it should ________ interest rates by _______ the money supply.

decrease; decreasing

decrease; increasing

increase; increasing

increase; decreasing