Under a System of Flexible Exchange Rates,an Increase in the International

question 42

Multiple Choice

Under a system of flexible exchange rates,an increase in the international value of a nation's currency will:

• A)cause a surplus of its currency
• B)contribute to disequilibrium in its balance of payments
• C)cause interest rates in that nation to rise
• D)cause its exports to rise
• E)cause its imports to rise

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Definitions:

Capital

Represents resources like funds, equipment, and properties used in the production of goods and services, contributing to the wealth of businesses or economies.

Comparative Advantage

is the ability of an individual or country to produce a good or service at a lower opportunity cost than competitors.

Opportunity Cost

The cost of what is foregone in order to pursue a certain action, essentially the benefits you could have received by taking an alternative action.

Consumer Sovereignty

The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase).