A Fixed Exchange Rate Regime Imposes Discipline in Two Ways

question 3

Multiple Choice

A fixed exchange rate regime imposes discipline in two ways: (1) the need to maintain a fixed exchange rate puts a brake on competitive devaluations and brings stability to the world trade environment and (2) a fixed exchange rate regime imposes what?

• A) social discipline on countries, thereby increasing the standard of living
• B) economic discipline on countries, thereby increasing gross national product
• C) political discipline on countries, thereby curtailing global opportunism
• D) monetary discipline on countries, thereby curtailing price inflation
• E) currency stability, thereby curtailing trade wars

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Definitions:

Percent of Sales Method

A forecasting technique used to estimate various financial metrics, like expenses or inventory levels, as a percentage of sales revenue.

Realizable Value

An estimate of the amount for which an asset can be sold or a liability settled under current market conditions.

Expense Recognition

An accounting principle that dictates the timing of reporting an expense in the financial statements.

Dishonors

Refers to the failure to accept or pay a bill of exchange or promissory note when due.