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:

Average Total Cost

The cost per unit of output, calculated by dividing the total production cost by the quantity of output produced.

Marginal Revenue

The supplementary earnings acquired from selling an extra unit of a product or service.

Competitive Market

A market structure where multiple firms are vying for consumers' business, thereby fostering innovation and fair pricing due to competition.

Total Revenue

The full amount of capital a business garners from the sale of goods or the rendering of services for a particular timeframe.