Which Statement Is True of a World with a System

question 185

Multiple Choice

Which statement is true of a world with a system of fixed exchange rates as opposed to one with floating rates?

• A) It requires less world liquidity or reserves.
• B) It creates less confidence about future values of currencies.
• C) It facilitates the transmission of shifts in economic conditions between countries.
• D) It increases the role of the central banks in foreign exchange markets.

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Definitions:

ATC

Stands for Average Total Cost, which is the sum of all production costs divided by the quantity of output produced.

Short Run

A period in economics during which some factors of production are fixed, making it impossible for a business to change major production facilities.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced; it decreases as production increases.

Output

The cumulative output of goods and services from a company or an economic system.