Other Fundamental Things Equal, an Increase in the Exchange Rate

question 57

Multiple Choice

Other fundamental things equal, an increase in the exchange rate value of the domestic currency will cause the current account to:

• A)fluctuate initially.
• B)equal the official settlements balance.
• C)move toward a long-run surplus.
• D)move toward a deficit.

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Definitions:

Psychophysics

The scientific study of the relationship between physical stimuli and the sensations and perceptions they produce in the human mind.

Weber's Law

A principle that states the smallest change in a stimulus, such as weight or brightness, that can be detected is a constant proportion of the original stimulus's intensity.

Differential Threshold

The smallest detectable difference between two stimuli or the minimum change in intensity that a person can detect.

Marketers

Professionals or organizations responsible for promoting, selling, and distributing products or services to customers.