The Exchange Rate Is Volatile Because

question 99

Multiple Choice

The exchange rate is volatile because

• A)government policy promotes interest rate fluctuation.
• B)the demand curve for foreign exchange is very flat.
• C)the demand curve for foreign exchange is very steep.
• D)the supply curve of dollars is vertical.
• E)the supply of dollars and demand for dollars are influenced by similar events.

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Definitions:

Normal Good

A type of good for which demand increases as the income of consumers increases, reflecting a direct relationship between income and demand.

Complements

Goods or services that are used together, where the use or consumption of one enhances the value or demand of the other.

Inferior Good

An inferior good is a type of product that sees an increase in demand as consumers’ income decreases, contrary to what is observed with normal goods.

Complement

A good or service that, when used together with another, enhances mutual use and utility, often impacting demand in correlated ways.