In Comparison to a Floating Exchange Rate Regime, a Fixed

question 56

Multiple Choice

In comparison to a floating exchange rate regime, a fixed exchange rate system is characterized by:

• A)smoother trade balance adjustments.
• B)increased destabilizing effects of exchange rate speculation.
• C)greater autonomy in terms of monetary policy.
• D)higher monetary discipline.
• E)greater exchange rate uncertainty and volatility.

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Definitions:

Actor/Observer Bias

The tendency to attribute one's own actions to external factors, while attributing others' actions to their character or disposition.

Fundamental Attribution Error

The tendency for observers to attribute others' behaviors to their character rather than to external factors.

Self-Fulfilling Prophecy

A prediction that directly or indirectly causes itself to become true, due to positive feedback between belief and behavior.

Personal Attribution

The process of ascribing the cause or reason for someone’s behavior to their personal characteristics or dispositions.