Suppose That a Nation Has Adopted a Fixed Exchange Rate

question 160

Multiple Choice

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit.What is most likely to happen?

• A)a gradual increase in the value of its currency 
• B)a gradual decrease in the value of its currency 
• C)a "run" on its currency and a sudden appreciation 
• D)a "run" on its currency and a sudden devaluation

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Definitions:

Revenue Recognition

Revenue recognition is the accounting principle that outlines the specific conditions under which revenue is recognized or accounted for, typically when goods or services are delivered and the payment is assured.

Performance Obligation

A duty or task that a company must execute to transfer goods or services to a customer under the terms of a contract.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board.

Accrual

The accounting principle of recording revenues and expenses when they are incurred, regardless of when cash transactions occur.