Which of the Following Is True of the Determination of Exchange

question 148

Multiple Choice

Which of the following is true of the determination of exchange rates?

• A) Differences in relative demand and supply do not explain the determination of exchange rates.
• B) Differences in relative demand and supply explain the factors underlying the phenomenon behind the demand for and supply of a currency.
• C) The differences in relative demand and supply alone provide a high level understanding of behind determination of exchange rates.
• D) While the differences in relative demand and supply they provide an accurate explanation for appreciation of currencies, they fail to explain depreciation.
• E) The differences in relative demand and supply cannot explain or predict the conditions under which a particular currency will be in demand or not.

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Definitions:

Aggregate Supply

The aggregate output of goods and services that companies in a national economy aim to market within a given timeframe.

Classical Economic Theory

A broad school of thought in economics that emphasizes the role of market forces and the flexibility of prices in achieving economic equilibrium, advocating minimal government intervention.

Stagflation

A situation in an economy where the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.

Output

The total amount of goods and services produced by an economy, business, or machine over a specific period of time.