The Case Against Fixed Exchange Rates Is

question 34

Multiple Choice

The case against fixed exchange rates is:

• A)the alleged smaller degree of uncertainty introduced into international trade and finance
• B)being more likely to lead to stabilizing speculation
• C)the greater price discipline than under flexible rates
• D)requires the use of policies to figure out how to deal with pressures on the foreign exchange rate

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Definitions:

Long-Run Aggregate Supply Curve

A graphical representation showing the relationship between the price level and the quantity of output that can be produced in the economy in the long run, assuming all resources are fully employed.

Capital Stock

The total representation of a company's or country's machinery, buildings, and other physical assets used in production.

Price Level

A measure of the average prices of goods and services in the economy, often compared over time to assess inflation or deflation.

Long-Run Aggregate Supply Curve

A vertical line representing the real output of goods and services that an economy can produce when it is fully employed, regardless of the level of demand.