Under a Floating Exchange Rate System, the Value of the Dollar

question 27

Multiple Choice

Under a floating exchange rate system, the value of the dollar per euro exchange rate rises when:

• A)The U.S.trade deficit with the euro-area countries increases.
• B)European demand for U.S.products increases.
• C)The U.S.government raises personal income tax rates.
• D)The inflation rate in the U.S.is much lower than the inflation rate in the euro-area.

---

Definitions:

Fiscal Stimulus Package

Government measures, usually involving increased public spending and tax cuts, aimed at boosting economic activity during a downturn.

Federal Government

A system of government in which powers and responsibilities are divided between a national government and state or provincial governments.

Surplus Federal Budget

A situation where the federal government's revenues exceed its expenditures within a given fiscal period.

National Saving

The total saving of a country, composed of the savings accumulated by both the private sector and the government, available for investment.