Suppose That at the Fixed Exchange Rate Implied by the Gold

question 159

Multiple Choice

Suppose that at the fixed exchange rate implied by the gold standard, the quantity demanded of Chahidi's currency exceeded the quantity supplied. This implies that

• A) Chahidi has a surplus in its balance of payments.
• B) Chahidi has a deficit in its balance of payments.
• C) Chahidi has a deficit in its capital account.
• D) The exchange rate will fall to restore equilibrium.

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Definitions:

Parallel Shift

occurs when a graph's curve moves left or right without changing its shape, often used in reference to demand or supply curves.

Relative Prices

The price of one good or service compared to another, reflecting its scarcity or value in exchange.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, highlighting the trade-offs in consumption preferences.

Total Utility

The total satisfaction received from consuming a particular quantity of goods or services.