When the Nominal Exchange Rate Changes from 4 Francs Per

question 143

Multiple Choice

When the nominal exchange rate changes from 4 francs per dollar to 6 francs per dollar, the dollar has:

• A)appreciated.
• B)depreciated.
• C)become overvalued.
• D)become undervalued.

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Definitions:

Long-run Average Total Costs

The per-unit production cost when all factors of production are variable and optimized for scale.

Long-run Average Total Cost

The per-unit cost of production when all inputs, including those typically fixed, can be varied, showing economies of scale if downward sloping.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the average cost of production falls with increasing output.

Constant Returns to Scale

A situation in production where increasing the input of all resources by any proportion yields an increase in output by the same proportion.