Under a Floating Exchange-Rate System,which of the Following Best Leads

question 47

Multiple Choice

Under a floating exchange-rate system,which of the following best leads to a depreciation in the value of the Canadian dollar?

• A) A decrease in the Canadian money supply
• B) A fall in the Canadian interest rate
• C) An increase in national income overseas
• D) Rising inflation overseas

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Definitions:

Marginal Cost

The addition to total cost that results from producing one more unit of output.

Diseconomies of Scale

The condition in which a company's costs per unit increase as it produces more units, typically due to inefficiencies that arise with increased size or output.

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additions to output will eventually decrease.

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.