Which One of the Following Statements Is TRUE

question 29

Multiple Choice

Which one of the following statements is TRUE?

• A)A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• B)A flexible exchange rate does not automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• C)A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the relative price of domestic and foreign goods.
• D)A flexible exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.
• E)A fixed exchange rate automatically cushions the economy's output and employment by allowing an immediate change in the absolute price of domestic and foreign goods.

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