Going Back to When France and Germany Had Separate Currencies

question 20

Multiple Choice

Going back to when France and Germany had separate currencies, if there was a shift in demand away from French goods and towards German goods, then

• A) there would be an increase in the rate of inflation in France.
• B) there would be an increase in unemployment in Germany.
• C) the foreign exchange value of the French franc would fall, thus making French goods relatively cheaper and so leading to an increase in aggregate demand for France's output that would off-set the initial reduction in aggregate demand.
• D) the foreign exchange value of the French franc would rise, thus making French goods relatively more expensive and so leading to an reduction in aggregate demand for France's output that would worsen the initial reduction in aggregate demand.

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Definitions:

Redistribution Programs

Government policies designed to reduce economic inequality by redistributing income from wealthier segments of society to poorer ones.

Specified Level

A predetermined or defined intensity, quantity, or magnitude of a particular variable.

Technological Change

Innovations and improvements in technology that enhance productivity, efficiency, and the overall quality of goods and services.

Income Inequality

Describes the uneven distribution of income among individuals in a society, where some earn significantly more than others.