Under the Flexible Exchange Rate System,when a Country Tries to Stimulate

question 39

Multiple Choice

Under the flexible exchange rate system,when a country tries to stimulate economic growth and improve its employment rates,it is likely to cause:

• A)the domestic inflation rate to rise and the domestic currency to depreciate.
• B)the domestic inflation rate to rise and the domestic currency to appreciate.
• C)the domestic inflation rate and the value of the domestic currency to remain constant.
• D)the domestic inflation rate to fall and the domestic currency to appreciate.
• E)the domestic inflation rate to fall and the domestic currency to depreciate.

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Definitions:

Normal Profit

The minimum level of profit necessary for a company to remain competitive in the market, often considered the break-even point.

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one more unit of a good or service. It is a critical concept in economics for decision-making regarding production levels.

Purely Competitive Market

A market structure characterized by many buyers and sellers, all of whom are selling a homogeneous product, with no single buyer or seller able to influence the market price.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing excess return over perfect competition.