If a Nation Has a Balance of Payments Deficit and Exchange

question 118

True/False

If a nation has a balance of payments deficit and exchange rates are flexible, the price of that nation's currency in the foreign exchange markets will rise.

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Definitions:

Infinitely Elastic

Describes a perfectly elastic demand or supply curve, where the quantity demanded or supplied changes by an unlimited amount in response to any change in price.

Income Elasticity

A measure of how the demand for a good or service changes in response to changes in income.

Supply Elasticity

The measure of responsiveness of the quantity of a good supplied to a change in its price.

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust all inputs in response to market conditions.