The Effects of an Increase in Real Money Demand on an Economy

question 42

Multiple Choice

The effects of an increase in real money demand on an economy

• A)is an argument against flexible exchange rates.
• B)is an argument in favor of flexible exchange rates.
• C)shows the difficulties in determining which exchange rate regime is better.
• D)is an argument in favor of flexible exchange rates only in the short run.
• E)is an argument against flexible exchange rates only in the short run.

---

Definitions:

Unfavorable Activity Variance

This term describes a situation where actual costs exceed the standards or budgeted amounts, leading to a negative variance.

Static Planning Budget

A budget based on a fixed level of activity, without adjusting for any variations in actual performance, useful for initial planning.

Flexible Budget

A budget that adjusts or varies with changes in the volume of activity, revenue, or other factors influencing budgeting.

Static Budget

A financial plan that does not change or adjust over the period, regardless of any changes in business activity levels.