Today, the Most Common Exchange Rate Arrangement in the World

question 137

Multiple Choice

Today, the most common exchange rate arrangement in the world is

• A) the fixed exchange rate system.
• B) the gold standard system.
• C) the managed floating system.
• D) the freely floating exchange rate system.

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Definitions:

Diminishing Returns

The principle that says as more of a variable input is added to a fixed input, the incremental gain in output will eventually decrease.

Normal Profits

The level of profit that is necessary to cover the costs of a firm, including the opportunity costs of capital, ensuring the firm remains in business.

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use resources it already owns, without paying rent or purchasing them.

Economic Profits

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs.