Alternative Proposals to Change the Current System of Exchange Rates

question 26

Multiple Choice

Alternative proposals to change the current system of exchange rates include

• A)a new explicit system of fixed exchange rates.
• B)adjustable target zones for exchange rates.
• C)a dirty float rate system.
• D)Both a and b
• E)Both b and c

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Definitions:

Diversification

The strategy of spreading investments across various financial assets to reduce exposure to risk.

Uncorrelated

Refers to two or more variables that do not have any predictive relationship with each other.

Negatively Correlated

A relationship between two variables in which one variable increases as the other decreases.

Positively Correlated

A term describing two variables that move in the same direction, such that when one variable increases, the other also increases.