Proponents of the Fixed Exchange Rate System Argue That

question 55

Multiple Choice

Proponents of the fixed exchange rate system argue that

• A) flexible exchange rates may promote international trade,but under a fixed exchange rate system at least we know what the rates will be from day to day.
• B) under a flexible exchange rate system,there is too great a chance that the exchange rate will diverge from the equilibrium exchange rate.
• C) under a flexible exchange rate system,there is no way of knowing what the exchange rate is at any particular point in time.
• D) under a fixed exchange rate system,there would be only one currency.
• E) none of the above

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Definitions:

GDP

The total market value of all goods and services produced within a country in a specific period, a broad indicator of economic performance.

Real GDP

Real Gross Domestic Product, which adjusts the GDP for inflation to show the actual worth of an economy's total production of goods and services within a year.

Real Terms

Refers to economic measures adjusted for inflation, enabling comparison of purchasing power across different times.

Population

The total number of people inhabiting a particular area, country, or region.