Which Exchange-Rate Mechanism Is Intended to Insulate the Balance of Payments

question 107

Multiple Choice

Which exchange-rate mechanism is intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions?

• A) Dual exchange rates
• B) Managed floating exchange rates
• C) Adjustable pegged exchange rates
• D) Crawling pegged exchange rates

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Definitions:

Credit Markets

Financial markets where borrowers can obtain funds from lenders, typically through the issuance of debt securities or loans.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade.

Increased Unemployment

A rise in the percentage of the labor force that is without work but available for and seeking employment.

Social Security

A government program that provides financial assistance to people with an inadequate or no income, primarily the elderly, disabled, and unemployed.