The Proponents of Fixed Exchange Rates Argue That Flexible Exchange

question 59

Multiple Choice

The proponents of fixed exchange rates argue that flexible exchange rates

• A) hamper international trade because of uncertainty over what the exchange rate will be.
• B) force a nation to use its domestic macroeconomic policies to maintain an exchange rate.
• C) lead to trade protectionism.
• D) a and b
• E) a,b,and c

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Definitions:

Tax

A compulsory financial charge imposed by a government on individuals or entities to fund various public expenditures.

Marginal Social Benefit

An additional gain to society derived from consuming or producing another unit of a good or service.

Marginal Social Cost

An increased charge to the general public for the creation of one more unit of a product or service.

Pollution

The presence in or introduction into the environment of a substance or thing that has harmful or poisonous effects.