Critics of the Balance of Payments Approach to Exchange Rate

question 32

Multiple Choice

Critics of the balance of payments approach to exchange rate determination point to the emphasis on ________ of currency and capital rather than ________ of money or financial assets.

• A) flows; stocks
• B) stocks; flows
• C) import; export
• D) export; import

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Definitions:

Scale of Operation

The size at which a company or factory operates, often impacting its production efficiency and costs.

Long Run

pertains to a time period in economics during which all factors of production and costs are variable, allowing for full adjustment to any change.

Diminishing Returns

A principle stating that as one input variable is increased, there will be a point at which the additions of output will begin to decrease, holding all other inputs constant.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm operates at higher levels of output.