Under a System of Fixed Exchange Rates,a Large Increase in Export

question 20

Multiple Choice

Under a system of fixed exchange rates,a large increase in export revenues (without a corresponding jump in imports) has what effect on the domestic money supply?

• A) The money supply will increase.
• B) The money supply will decline.
• C) The money supply will not be affected.
• D) The answer depends on whether the central bank has imposed credit controls on the commercial banks.

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Definitions:

Expected Profit

The forecasted gain from an investment or business operation, taking into account the probability of different outcomes.

Souvenirs

Items purchased or acquired during a trip or at an event to serve as a reminder or for personal keepsake.

Product Availability

The extent to which goods are in stock and ready for purchase by customers.

Supply Chain

The network between a company and its suppliers to produce and distribute a specific product to the final buyer, encompassing all stages of processing and shipping.