Under a Fixed-Rate System, a Country That Followed Policies That

question 22

Multiple Choice

Under a fixed-rate system, a country that followed policies that would lead to a higher rate of inflation than that experienced by its trading partners would

• A) experience a balance?of?payments surplus as its goods became more expensive
• B) see a decrease in the supply of its currency on the foreign exchange markets
• C) find its currency subject to upward pressure
• D) experience a balance?of?payments deficit as its goods became more expensive

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Definitions:

Profit

The financial gain achieved when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Harvest

The process or period of gathering in crops.

Life Tenant

An individual who has the right to use and benefit from property during their lifetime, but cannot sell or transfer the property.

Extract Minerals

The process of removing solid minerals from the earth, which are then used in various industries and products.