Given a System of Floating Exchange Rates, Other Things Equal

question 16

Multiple Choice

Given a system of floating exchange rates, other things equal an expansionary fiscal policy by the United States will cause

• A) the dollar to appreciate and will decrease U.S. net exports.
• B) the dollar to appreciate and will increase U.S. net exports.
• C) the dollar to depreciate and will increase U.S. net exports.
• D) the dollar to depreciate and will decrease U.S. net exports.

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Definitions:

Insurance

A risk management tool that provides financial protection against loss or harm in exchange for premium payments.

Taxes

Compulsory financial charges or some other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Independent Demand

The need for a product or component that is not influenced by the demand for other items in inventory.