Under a System of Flexible Exchange Rates, Transactions That Increase

question 41

Multiple Choice

Under a system of flexible exchange rates, transactions that increase the supply of the nation's currency to the foreign exchange market will cause the nation's

• A) currency to depreciate in value.
• B) currency to appreciate in value.
• C) trade deficit to increase.
• D) products to become more expensive to foreigners.

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Definitions:

Nonrenewable Resource

A natural resource that cannot be readily replaced by natural means on a level quick enough to keep up with consumption.

Market Price

The current price at which an asset or service can be bought or sold, determined by the supply and demand dynamics in the open market.

Conservation

The careful management and preservation of natural resources to prevent waste, degradation, or loss.

Cost-Benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives used to determine the best option(s) through the benefits and costs.