Exchange Rate Pass-Through May Be Defined As

question 14

Multiple Choice

Exchange rate pass-through may be defined as:

• A) the bid/ask spread on currency exchange rate transactions.
• B) the degree to which the prices of imported and exported goods change as a result of exchange rate changes.
• C) the PPP of lesser-developed countries.
• D) the practice by Great Britain of maintaining the relative strength of the currencies of the Commonwealth countries under the current floating exchange rate regime.

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Definitions:

Expected Value

The average outcome of a random event when considering all possible outcomes and their probabilities.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Von Neumann-Morgenstern Utility Function

A utility function theory based on expected utility, fundamental in making rational decisions under uncertainty, emphasizing outcomes' probabilities.

Probability

The measure of the likelihood that an event will occur.