Under Fixed Exchange Rate, the Response of an Economy to a Temporary

question 126

Multiple Choice

Under fixed exchange rate, the response of an economy to a temporary fall in foreign demand for its exports is

• A) the currency appreciates, and output falls.
• B) the currency depreciates, and output falls.
• C) the currency remains the same, and output decreases.
• D) the currency depreciates, and output remains constant.
• E) the currency appreciates, and output remains the same.

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Definitions:

Distinctive Thoughts

Unique or specific mental processes or ideas that set an individual or concept apart from others.

Demands of Reality

Refers to the pressures and requirements placed on individuals by the factual conditions or situations of life.

Freud

Sigmund Freud, an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Ego

In psychoanalytic theory, the part of the mind that mediates between the conscious and the unconscious and is responsible for reality testing and a sense of personal identity.