The Reason for Calling the Current Exchange Rate System a "Managed

question 25

Multiple Choice

The reason for calling the current exchange rate system a "managed float" is

• A)it is managed by the IMF
• B)it is basically a misnomer because it is impossible to "manage" exchange rates
• C)it recognizes that there will be some intervention by central banks
• D)only the forces of supply and demand determine the exchange rates
• E)Congress passed a law declaring that the exchange rate system be legally termed "managed float"

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Definitions:

Short Run

A period in which at least one input in the production process is fixed, and only some inputs can be adjusted by firms.

Decreasing Costs

A situation where the total cost of production decreases as the volume of production increases.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, inversely related to normal goods.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and economic forces are balanced, leading to no net inclination to change.