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:

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits via dividends.

Available-for-sale Securities

Financial assets that are not classified as held-for-trading or held-to-maturity, and can be sold in the market.

Fair Value

An estimate of the market value of an asset or liability, based on current prices in an active market or valuation models, indicating what a willing buyer and seller would agree to exchange it for.

Accrued Interest

Interest that has accumulated over a period of time but has not yet been paid or charged.