Comparing Fixed to Flexible Exchange Rate, the Response of an Economy

question 60

Multiple Choice

Comparing fixed to flexible exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is:

• A) output actually falls less under fixed rate than under floating rate.
• B) output actually falls more under fixed rate than under floating rate.
• C) output actually remains the same under fixed rate than under floating rate.
• D) the currency value grows in a fixed rate system and falls in a flexible system.
• E) output grows in a fixed rate system and falls in a flexible system.

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Definitions:

Relative Concept

An idea or principle that is understood in relation to something else or varies according to context.

Welfare Benefit Levels

The amount of financial aid provided by government programs to support individuals and families in need.

Poverty Income Threshold

A measurement used to determine the income level below which an individual or family is considered to be living in poverty, based on the size of the family and composition.

Liberal Position

A political ideology favoring more government intervention in economic matters and more social freedoms, emphasizing equality and social justice.