Use the Following to Answer Questions

question 34

Multiple Choice

Use the following to answer questions :
Exhibit: Policies Influence Real Exchange Rate

-(Exhibit: Policies Influence Real Exchange Rate) Which of the graphs illustrates the impact on the real exchange rate of an increase in household saving in the basic version of the small open economy model?

• A) (B) (
• C) (
• D) (

---

Definitions:

Price Ceilings

Price Ceilings are government-imposed limits on how high a price can be charged for a product, service, or commodity, often implemented to protect consumers from excessively high costs but can lead to shortages.

Equilibrium Price

A price where the supplied goods quantity is identical to the demanded goods quantity.

Law Of Demand

An increase in a product’s price will reduce the quantity of it demanded, and conversely for a decrease in price.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price over a specified period.