Under a Floating Exchange Rate Regime with a High Degree

question 45

Multiple Choice

Under a floating exchange rate regime with a high degree of capital mobility, in the short run an expansionary fiscal policy will most likely create pressure on:

• A)the domestic currency to appreciate.
• B)the domestic currency to depreciate.
• C)monetary authorities to revalue the domestic currency.
• D)monetary authorities to devalue the domestic currency.

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Definitions:

Assignment

The transfer of rights, property, or obligations from one party to another.

Notice

A formal communication or announcement given to inform parties of legal actions, decisions, or the need for response, depending on specific legal or contractual requirements.

Novation

is the act of replacing one obligation with another by mutual agreement, effectively transferring the rights and duties of one party under a contract to another party.