Which of the Following Is/are INCORRECT? an Argument Against Floating

question 140

Multiple Choice

Which of the following is/are INCORRECT? An argument against floating exchange rates is that

• A) a fixed rate automatically prevents instability in the domestic money market from affecting the economy if shocks come from home domestic money market.
• B) a fixed rate might become unpredictable, complicating economic planning.
• C) a rise in money demand under a fixed exchange rate would have no effect on the exchange rate and output.
• D) a fixed rate functions within the price-specie-flow mechanism and maintains a balance of payments equilibrium,
• E) a fixed rate automatically prevents instability in the economy from output market shocks.

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Definitions:

Abram Maslow

A psychologist best known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs.

Needs Hierarchy

A theory, often associated with Abraham Maslow, which suggests that human needs are arranged in a hierarchy, starting from basic physical requirements up to higher needs like self-actualization.

Physiological

Physiological pertains to the functions and processes that occur within living organisms, providing a basis for understanding physical and biological needs.

Victor Vroom

Victor Vroom is known for his work on expectancy theory, which suggests that individual motivation is influenced by expected outcomes and the value placed on those outcomes.