Once an Equilibrium Is Achieved,it Can Persist Indefinitely Because

question 147

Multiple Choice

Once an equilibrium is achieved,it can persist indefinitely because

• A) shocks that shift the demand curve or the supply curve cannot occur.
• B) shocks to the demand curve are always exactly offset by shocks to the supply curve.
• C) the government never intervenes in markets at equilibrium.
• D) in the absence of supply/demand shocks no one applies pressure to change the price.

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Definitions:

International Monetary System

The framework of rules, institutions, and agreements by which countries exchange currencies and settle international financial transactions.

Flexible Exchange Rate

Rate determined in foreign exchange markets by the forces of demand and supply without government intervention.

Fixed Exchange Rate

A currency system where the value of a currency is pegged to another currency, a basket of currencies, or a physical commodity like gold.

Exchange Rate

The price of one currency in terms of another, determining how much foreign currency can be exchanged for a unit of domestic currency.