Which One of the Following Statements Is True

question 77

Multiple Choice

Which one of the following statements is true?

• A) A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• B) A flexible exchange rate does not automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• C) A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• D) A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.
• E) A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.

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Definitions:

Appropriate Discount Rate

The interest rate used to discount future cash flows of an investment, reflecting the risk level and the time value of money.

Annual Dividend

The total dividend payment a company distributes to its shareholders for the year, often cited as a per share amount.

Dividends Increase

This is when a company decides to increase the amount of money distributed to its shareholders from its earnings.