If the Nominal Exchange Rate Were to Be Expressed as the Number

question 42

Multiple Choice

If the nominal exchange rate were to be expressed as the number of units of domestic currency per unit of foreign currency, and that rate decreases, then the domestic currency has:

• A)appreciated.
• B)depreciated.
• C)become overvalued.
• D)become undervalued.

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Definitions:

Stagflation

A situation where an economy experiences stagnant growth, high unemployment, and high inflation simultaneously, presenting a challenge to economic policy.

Actual Price Level

The current level of prices in the economy for goods and services, reflecting inflation or deflation in the market.

Real Wages

The purchasing power of wages, taking into account the effects of inflation or deflation, representing the quantity of goods and services wages can buy.

Cyclical Unemployment

Unemployment that rises during economic downturns and falls when the economy improves, directly related to cycles of economic upturn and downturn.