Countries Tend to Be Less Served by a Fixed Exchange

question 54

Multiple Choice

Countries tend to be less served by a fixed exchange rate system when

• A) they are small, open economies.
• B) their inflation differentials are modest.
• C) they are highly exposed to international capital movements.
• D) their wages are quite flexible to changing market conditions.

---

Definitions:

Coconuts

The large, brown, hard-shelled seeds of the coconut palm, used for food, oil, and as a source of material.

Fish

Aquatic vertebrates that live in water, breathe with gills, and typically have fins and scales.

Increasing Returns to Scale

A situation in production where an increase in the quantity of inputs leads to a proportionally larger increase in output.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.