There Is a Flexible Exchange Rate System and Only Two

question 119

Multiple Choice

There is a flexible exchange rate system and only two countries in the world,the United States and Mexico.An increase in income growth in Mexico relative to income growth in the United States will cause the

• A) dollar to appreciate.
• B) peso to depreciate.
• C) dollar to depreciate.
• D) a and b
• E) There is not enough information to answer the question.

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Definitions:

Market Distortion

An economic phenomenon where external factors lead to a deviation from the expected or efficient allocation of resources, often causing prices to be higher or lower than they would be in a free market.

Taxed

Subjected to a compulsory financial charge or levy by governmental organizations for the funding of state expenditures.

Worse Off

A situation or condition in which an individual or group is in a less favorable position than before.

Demand Curve

A graph showing the relationship between the price of a good and the amount of it that consumers are willing to purchase at various prices.