In a Fixed Exchange Rate Regime, an Increase in the Price

question 43

Multiple Choice

In a fixed exchange rate regime, an increase in the price level will cause:

• A) a real appreciation and no shift in the aggregate demand curve.
• B) no change in the real exchange rate, and no change in aggregate demand.
• C) a real depreciation and a rightward shift in the aggregate demand curve.
• D) a real appreciation and a leftward shift in the aggregate demand curve.
• E) a real depreciation and no shift in the aggregate demand curve.

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Definitions:

Three Figure Accuracy

Refers to rounding numerical values to three significant figures for precision in calculations or reporting.

Pair of Equations

Two mathematical equations set up in relation to each other, often used to find the values of two unknown variables by solving them simultaneously.

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A group of equations that are solved together, where each equation may have multiple variables.