The Flexibility of Floating Rates May Generate the Problem of

question 110

Multiple Choice

The flexibility of floating rates may generate the problem of

• A) Inflationary bias
• B) Deflationary bias
• C) Continuous depreciation
• D) Both a and c

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Definitions:

Efficient Level

The optimal point at which a particular activity achieves the best output or outcome with the least waste of resources or effort.

Marginal Social Cost

The total cost to society of producing an additional unit of a good, including both private costs and any externalities.

External Cost

Costs of a transaction that affect people other than the buyer or seller, often not included in the price of goods or services.

Efficient Amount

The level of production or quantity of a good that optimizes the use of resources to achieve the highest possible satisfaction or benefits.