International Trade Under a Floating Exchange Rate System

question 86

Multiple Choice

International trade under a floating exchange rate system

• A)has been trouble-free owing to the stabilizing role of speculators in the currency markets.
• B)has suffered from so many problems that the volume of trade has declined significantly.
• C)exposes businesses to unavoidable risks when exchange rates change.
• D)has been subject to wild runs on currencies that were on the verge of devaluation.

---

Definitions:

Quantity Demanded

This is the total amount of a good or service that consumers are willing and able to purchase at a given price over a specified period.

Cross Price Elasticity

A measure of how the demand for one product changes in response to a change in the price of another product, indicating substitutes or complements.

Substitutes

Goods or services that can replace each other in use, affecting demand when their prices or other attributes change.

Demand

The quantity of a product or service consumers are willing and able to purchase at various prices.