Under a Floating Exchange Rate Regime with a Low Degree

question 11

Multiple Choice

Under a floating exchange rate regime with a low degree of capital mobility, a change in the exchange rate value of domestic currency following expansionary fiscal policy will tend to:

• A)deteriorate the current account.
• B)decrease the country's holdings of official reserve assets.
• C)give a trade-based stimulus to domestic production.
• D)cause a surplus in the financial account.

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Definitions:

Auditors

Professionals or firms appointed to review and verify an organization's financial records and statements to ensure accuracy and compliance with accounting standards.

Financial Asset

An intangible asset whose value is derived from a contractual claim, such as stocks, bonds, and bank deposits.

Mutual Fund

A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, managed by an investment company.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.