Under a Fixed Exchange System with a Flexible Price Level,balance

question 3

Multiple Choice

Under a fixed exchange system with a flexible price level,balance of payments equilibrium will occur

• A)only through a devaluation.
• B)automatically,in the long-run.
• C)only with an activist monetary policy.
• D)only with a revaluation.

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Definitions:

Commercial Paper

Unsecured, short-term promissory notes of large firms, usually issued in denominations of $100,000 or more and having an interest rate of somewhat below the prime rate.

Credit Quality

An assessment of the creditworthiness of a borrower, reflecting their ability to repay debt.

Risky

Involving or exposed to a high degree of uncertainty or subject to potential loss.

Prime Rate

The lowest interest rate that banks generally charge their best customers.