In a Perfectly Floating Exchange Rate Regime,according to the Monetary

question 46

Multiple Choice

In a perfectly floating exchange rate regime,according to the monetary approach to the exchange rate MAER,what would be the effect of a decrease in U.S.output growth by 3% on the dollar price of a Swiss franc $/SFr?

• A) Swiss franc would depreciate against the dollar.
• B) Swiss franc would appreciate against the dollar.
• C) The exchange rate remains unaffected.
• D) The dollar would appreciate against the Swiss Franc.

---

Definitions:

Simple Rate Of Return

A financial metric that calculates the return on an investment without considering the time value of money, focusing on annual income and initial investment cost.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, making for a simple depreciation calculation.

Proposed Investment

A prospective asset or capital outlay under consideration for its potential to generate income or appreciate in value.

Simple Rate Of Return

A calculation that measures the percentage return on an investment or project, not accounting for the complexity of interest compounding.