Given the Following Diagram, with Flexible Exchange Rates

question 12

Multiple Choice

Given the following diagram, with flexible exchange rates:

Assume that the economy is in domestic equilibrium. In this situation, there will be __________ in the country's balance of payments (official reserve transactions balance) , with the consequence that the country's currency will __________ in the foreign exchange markets.

• A) an incipient deficit; depreciate
• B) an incipient deficit; appreciate
• C) an incipient surplus; depreciate
• D) an incipient surplus; appreciate

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Definitions:

Bar Chart

A graphical representation of data where the values are depicted by the length of bars.

Bar Chart

A graphical display of data using bars of different heights or lengths to represent values of different categories.

Interval Data

Data measured along a scale, where each point is placed at an equal distance from one another, allowing for operations like addition and subtraction.

Pie Charts

A circular statistical graphic divided into slices to illustrate numerical proportion, with the size of each slice proportional to the quantity it represents.