Under a Fixed?rate System, a Country That Followed Policies That

question 5

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 deficit 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 exchange rate subject to upward pressure
• D) experience a balance-of-payments surplus.

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Definitions:

Standard Deviation

An indicator of the extent of variability or spread within a data set, showing how far from the average the values range.

Deviations

Differences from a central value, such as the mean or median, indicative of variability within a data set.

Mean

The arithmetic average of a set of numbers, calculated by adding all the numbers and dividing by the count of numbers.

Standard Deviation

A gauge for determining the extent of fluctuation or diversity in data points around the central value.