Which of the Following Is Not a Major Disadvantages of a Flexible

question 228

Multiple Choice

Which of the following is not a major disadvantages of a flexible exchange-rate system?

• A)It is susceptible to wild swings in rates, causing high uncertainty and reduced trade.
• B)It could drain the foreign-exchange reserves of a nation.
• C)A depreciation of a nation's currency would worsen its terms of trade.
• D)Wild swings in exchange rates may destabilize the domestic economy through the effects on the traded-goods sectors.

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Definitions:

Total Dollars

The aggregate or total amount of money without adjusting for factors such as inflation or purchasing power.

Optimal Factor Mix

The most efficient combination of resources and inputs a firm uses to produce goods or services at the lowest cost.

Resource Markets

Markets where productive inputs, such as labor, natural resources, and capital, are bought and sold.

Productivities

The levels of output or efficiency achieved from a set amount of inputs in production or work processes.