When a Country Uses a Flexible (Or Floating) Exchange Rate

question 229

Multiple Choice

When a country uses a flexible (or floating) exchange rate and its transactions increase the supply of its currency, the country's:

• A) products become more expensive to others.
• B) currency depreciates.
• C) currency appreciates.
• D) trade deficit increases.

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Definitions:

Unlearned Reaction

An instinctive response to a stimulus that does not require previous experience or learning.

Reflexive Response

An automatic reaction to a specific stimulus without conscious thought, often as a protective mechanism.

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus, famously demonstrated by Ivan Pavlov.

Learning Fear

The process by which living beings acquire a fear response to a previously neutral stimulus through conditioning.