Which of the Following Would Decrease the Real Exchange Rate

question 95

Multiple Choice

Which of the following would decrease the real exchange rate in a small open economy in the long run?

• A) a personal income tax cut
• B) a reduction in government spending
• C) a tariff on imports
• D) an increase in investment

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Definitions:

Direct Fixed Manufacturing Costs

Costs that are directly attributable to the production process and do not vary with the level of output but remain constant within a specific time period.

Component

A part or element of a larger system, device, or piece of equipment that is essential to its function.

Variable Expenses

Costs that change in relation to the level of activity or volume of production.

Fixed Expenses

Costs that do not vary with the level of production or sales over a short period, such as rent and salaries.