Suppose There Are Two Countries, X and Y

question 40

Multiple Choice

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

• A) The exchange rate for X's currency is 9.
• B) The exchange rate for X's currency is more than 9.
• C) The exchange rate for X's currency is 3.
• D) The exchange rate for X's currency is 0.11.
• E) Knowing one exchange rate does not mean we can tell the other exchange rate.

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Definitions:

Price Level

An index that measures the average of current prices across the entire spectrum of goods and services produced in the economy compared to a base year.

Interest Rate

The interest rate is the percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Business Production

Activities involved in the creation of goods and services to meet consumer demand.

Employment

The state of having paid work, where an individual offers their skills and labor in exchange for compensation.