An Advantage of a Flexible Exchange Rate System Relative to a Fixed

question 14

Multiple Choice

An advantage of a flexible exchange rate system relative to a fixed system is that in a flexible rate system

• A)currency speculation will be reduced.
• B)balance of payments surpluses and deficits can be dealt with using fiscal policy,not monetary policy.
• C)inflation will be minimized by the "discipline of the balance of payments."
• D)the price of imported goods will be kept relatively low.
• E)none of the above.

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Definitions:

Amount Owing

The total sum of money that is due to be paid.

Operating Expense

An ongoing expense incurred in the operation of a business, such as rent, utilities, and salaries.

Operating Profit

Earnings before interest and taxes, calculated by subtracting operating expenses from gross profit.

Mark-up

The difference between the cost of a good or service and its selling price, expressed as a percentage over the cost.