Under the Pure Flexible Exchange Rate Regime

question 20

Multiple Choice

Under the pure flexible exchange rate regime,

• A)the combined balance on the current and capital accounts will be equal in size,but opposite in sign,to the change in the official reserves.
• B)the balance on the current and capital accounts will be equal in size,but opposite in sign.
• C)a current account surplus or deficit must be matched by an official reserves deficit or surplus.
• D)a capital account surplus or deficit must be matched by an official reserves deficit or surplus.

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Definitions:

Non-collusive Oligopolist

A firm in an oligopoly market structure that independently sets prices and output levels without secret agreements with competitors.

Marginal Cost

The increase in cost that comes from making one more unit of a product or service.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to a balance in the market.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply equals demand.