Comparing Fixed to Flexible Exchange Rate, the Response of an Economy

question 60

Multiple Choice

Comparing fixed to flexible exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is:

• A) output actually falls less under fixed rate than under floating rate.
• B) output actually falls more under fixed rate than under floating rate.
• C) output actually remains the same under fixed rate than under floating rate.
• D) the currency value grows in a fixed rate system and falls in a flexible system.
• E) output grows in a fixed rate system and falls in a flexible system.

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