In a flexible exchange rate system:
(a) The government intervenes to influence the exchange rate.
(b) The exchange rate should adjust to equate the supply and demand of the currency.
(c) The Balance of Payments should always be in surplus.
(d) The Balance of payments will always equal the government budget.
Answer: (b) The exchange rate should adjust to equate the supply and demand of the currency.
You might also like to view...
If the level of output produced by the firms in a perfectly competitive market has no effect on the prices of the inputs used by the firms, the market supply curve will be flatter than the supply curve for an individual firm in the market
Indicate whether the statement is true or false
Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80, then we know that
A) as Yd rises by $1, Co rises by $0.80. B) as Yd rises by $1, C rises by $0.80. C) Yd rises by $0.80. D) as C0 rises by $0.80, Yd rises by $1.
The conventional monetary policy to fight inflation would be to
A. increase the rate of monetary growth. B. decrease the rate of monetary growth. C. run budget deficits. D. run budget surpluses.
Which of the following is given in the video as an example of a negative real shock to the economy?
A. A technological advance that increases investment B. A rapid rise in the price of oil C. A decrease in consumer confidence D. A stretch of very bad weather