The Biggest Disadvantage of a Fixed Exchange Rate Is the

question 28

Multiple Choice

The biggest disadvantage of a fixed exchange rate is the

• A)increased probability of high inflation.
• B)tradeoff between supporting the exchange rate and adjusting the trade balance.
• C)tradeoff between supporting the exchange rate and maintaining economic growth.
• D)tradeoff between supporting the exchange rate and maintaining a balanced budget.

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Definitions:

Investing Activities

These are transactions related to the acquisition or sale of long-term assets and other investments not included in cash equivalents.

Note Payable

A written promise to pay a specific amount of money, usually with interest, by a certain date.

Financing Activities

These refer to transactions and business events involving the flow of cash between a company and its investors, creditors, and owners, such as issuing shares, borrowing loans, and paying dividends.

Accounts Receivable Balance

The total amount of money due to a company for goods or services delivered or used but not yet paid for by customers.