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:

Pavlov

A Russian physiologist best known for developing the concept of the conditioned reflex through experiments with dogs, leading to the foundation of classical conditioning in behaviorism.

Law of Effect

A principle suggesting that responses that produce a satisfying effect in a particular situation become more likely to occur again in that situation, while responses that produce a discomforting effect become less likely.

Titchener

Edward Bradford Titchener, an early 20th-century psychologist, known for developing the theory of structuralism, which focused on understanding the structure of the mind through introspection.

Skinner

Renowned psychologist B.F. Skinner, known for his work in behaviorism and development of the theory of operant conditioning.