A Common Argument for Fixed Exchange Rates Is That They

question 33

Multiple Choice

A common argument for fixed exchange rates is that they:

• A) make trade more costly, and thus encourage domestic citizens to buy domestically produced output.
• B) give central banks greater freedom in adjusting their economy's level of output.
• C) forever free the central bank from have to adjust the exchange rate to fundamental changes in the economy.
• D) All of the above.
• E) None of the above.

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Definitions:

Organic

Organic refers to products or methods that rely on farming without the use of synthetic pesticides, fertilizers, genetically modified organisms (GMOs), or other artificial agents.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for product differentiation and some degree of market power for each firm.

Long Run

A period of time in which all factors of production and costs are variable, allowing firms to adjust fully to market conditions.

Deadweight Loss

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or achievable.