If There Is a Fixed-Exchange-Rate System, Then in the Long

question 84

Multiple Choice

If there is a fixed-exchange-rate system, then in the long run:

• A) the nominal exchange rate is fixed, but the real exchange rate is free to vary.
• B) the real exchange rate is fixed, but the nominal exchange rate is free to vary.
• C) both the nominal and real exchange rates are fixed.
• D) the nominal and real exchange rates vary by a fixed amount.

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Definitions:

Segregate

To separate or set apart from others or from the main body or group; isolation.

Overload

A situation where the demand or workload exceeds the current capacity or resources available.

Differential Analysis

A decision-making technique that focuses on the cost and revenue differences between alternative business decisions.

Relevant Costs

Costs that are directly associated with a specific decision and will change based on the outcome of that decision.