Which One of the Following Is a Disadvantage of a Fixed

question 49

Multiple Choice

Which one of the following is a disadvantage of a fixed exchange rate system:

• A)Importers are insulated from the risk that the currency will appreciate over time.
• B)Management of an MNC is less difficult.
• C)The government might change the value of the currency.
• D)Exporters are insulated from the risk that the currency will depreciate over time.

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that producers are willing to sell, holding other factors constant.

Interest Rates

The percentage charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage of the principal.

Loanable Funds Theory

An economic theory that suggests the market interest rate and the quantity of loanable funds are determined by the demand and supply of credit.

Interest Rates

The cost of borrowing money or the return on investments, usually expressed as a percentage.