Which of the Following Is an Argument of Opponents of Devaluations

question 45

Multiple Choice

Which of the following is an argument of opponents of devaluations?

• A) A devaluation causes a nation with fixed exchange rates to lose credibility in the medium run, driving its interest rate higher.
• B) Participants in foreign exchange markets have a short memory: if the expected devaluation doesn't occur within a short time- period, they will stop expecting it.
• C) Devaluations cause relatively slow adjustments.
• D) Devaluations allow output to return to its natural level quickly.
• E) Both B and C.

---

Definitions:

Attractiveness

The quality that makes something appealing or desirable.

Production Function

An equation that specifies the output that a firm can produce with various combinations of inputs, reflecting the relationship between input and output quantities.

Service Firms

Businesses that primarily offer intangible products, such as services or expertise, to their customers.

Operations Management

The field of management focused on designing, controlling, and improving the production process and redesigning business operations in the production of goods or services.