Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?
A. A gradual increase in the value of its currency
B. A gradual decrease in the value of its currency
C. A “run” on its currency and a sudden appreciation
D. A “run” on its currency and a sudden devaluation
Answer: D
You might also like to view...
A noncooperative game would refer to a situation in which oligopoly firms
A) are too small to be interdependent. B) do not engage in collusive behavior together. C) are made worse off by their actions. D) behave as a joint monopoly.
The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly
a. True b. False Indicate whether the statement is true or false
In comparing money to a U.S. Treasury bond held by an individual, we can say:
A. only the bond is legal tender since it is an obligation of the U.S. government. B. both are legal tender. C. both are units of account. D. both are stores of value.
If the reserve ratio is designated by "r," the amount of deposits a bank can hold as excess reserves is equal to 1 / (1 - r).
Answer the following statement true (T) or false (F)