Which One of the Following Statements Is TRUE

question 8

Multiple Choice

Which one of the following statements is TRUE?

• A) A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• B) A flexible exchange rate does not automatically cushion the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• C) A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• D) A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.
• E) A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.

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Definitions:

Output Expansion

The increase in the production of goods and services in an economy or by a firm, often as a result of increased demand or improved production capabilities.

Period Lengthened

The extension of time allocated for a particular activity, phase, or process.

Price-taker Market

A market in which individual sellers cannot influence the market price and must accept the prevailing market price for their goods or services.

Antitheft Auto Alarms

Security devices installed in vehicles designed to deter theft by emitting a loud noise or other alerts when unauthorized access is attempted.