Assume a U

question 16

Multiple Choice

Assume a U.S.-based MNC has a Chilean subsidiary that annually remits 30 million Chilean pesos to the U.S. If the peso ____, the dollar amount of remitted funds ____.

• A) appreciates; decreases
• B) depreciates; is unaffected
• C) appreciates; is unaffected
• D) depreciates; decreases
• E) B and C

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Definitions:

Multiplier

In economics, a factor by which a change in spending results in an amplified change in national income and output.

Inflationary Gap

The difference between the actual output of an economy and the output it would produce without inflation, indicating an overheated economy.

Recessionary Gap

A situation where the real GDP is lower than the potential GDP at full employment, indicating underutilized resources.

Inflationary Gap

A scenario where aggregate demand exceeds aggregate supply at the level of full employment, leading to an increase in general price levels.