Under Fixed Exchange Rate, in General

question 19

Multiple Choice

Under fixed exchange rate, in general

• A) the domestic and foreign interest rates are equal, R = R*.
• B) R = R + (Eᵉ - E)/E.
• C) the foreign and domestic interest rates are unequal.
• D) the expected rate of domestic currency depreciation is high.
• E) the expected rate of currency depreciation is one.

---

Definitions:

Positive Externalities

Benefits that occur to a third party not directly involved in an economic transaction, leading to underproduction if not addressed.

Patent Policy

Guidelines and laws governing the protection of inventions and innovations, ensuring inventors have exclusive rights to their creations for a predetermined period.

Government Intervention

The active involvement by a government in the economic or social affairs of a country, which can include regulations, subsidies, tariffs, and public services.

Internalize Externalities

The process of adjusting market prices to account for the external costs or benefits generated by a product or service's production or consumption.