Which of the Following Statements Is Not True in the Current

question 211

Multiple Choice

Which of the following statements is not true in the current exchange-rate system?

• A)Major currencies like the U.S. dollar, euro, pound, and yen operate mostly in a flexible system responding to supply and demand forces.
• B)Some developing nations peg their currencies to the dollar and allow their currencies to fluctuate with it relative to other currencies.
• C)Each country uses its own unique currency; for example, only the U.S. uses the U.S. dollar as its currency.
• D)Many nations peg their currencies to a "basket," or group, of other currencies, rather than to a single other currency.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowing funds; this expense is reported on the income statement.

Stated Interest Rate

The nominal interest rate stated on a financial instrument, such as a loan or bond, without adjustment for compounding or market conditions.

Carrying Amount

The value at which an asset is recognized on the balance sheet after deducting accumulated depreciation and impairment losses.

Market Rate of Interest

The prevailing rate of interest for securities or loans in the market, determined by supply and demand and influenced by the general economic conditions.