Suppose the United States Has a Fixed Exchange Rate, and It

question 69

Multiple Choice

Suppose the United States has a fixed exchange rate, and it faces domestic recession and a trade deficit.Assuming it desires overall balance, if the United States devalues the dollar, other things equal one would expect which of the following to occur?

• A) the recession to become less severe and the trade deficit to become less severe
• B) the recession to become more severe and the trade deficit to become less severe
• C) the recession to become less severe and the trade deficit to become more severe
• D) the recession to become more severe and the trade deficit to become more severe

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Definitions:

Incremental Theorists

Individuals who believe that their abilities and intelligence can grow and change through effort and experience.

Fixed

A characteristic, value, or condition that remains constant and unchanged across different situations or over time.

Stable

Referring to something that is not likely to change or move; in psychology, it may refer to consistent personality traits or conditions.

Internal Attributions

The process of attributing the cause of one's own or another's behavior to internal, personal characteristics rather than to external factors.