In a Floating Exchange Market, the Exchange Rate for Pesos

question 18

Multiple Choice

In a floating exchange market, the exchange rate for pesos and yen will not change when

• A)the yen trades at a rate below the equilibrium level.
• B)the peso trades at a rate above the equilibrium level.
• C)the currencies trade at the equilibrium exchange rate.
• D)it will change in all of these situations.

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Definitions:

Interest Rate

Interest Rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Credit Cards

Financial instruments issued by banks that allow holders to borrow funds at the point of sale, intended for short-term financing with the obligation of paying back the borrowed amount plus interest.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits, checking accounts, and negotiable instruments.

Debt

is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor.