Which One of the Following Is a Disadvantage of a Fixed

question 49

Multiple Choice

Which one of the following is a disadvantage of a fixed exchange rate system:

• A)Importers are insulated from the risk that the currency will appreciate over time.
• B)Management of an MNC is less difficult.
• C)The government might change the value of the currency.
• D)Exporters are insulated from the risk that the currency will depreciate over time.

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Definitions:

Liquidating Dividend

A type of dividend paid by a company to its shareholders out of its capital base, indicating a return of some of the original investment rather than profit.

Capital Contributed

The total value of cash and other assets that shareholders or owners have given to a company in exchange for an ownership interest.

Federal Law

Legislation enacted by the national government of a country, applicable across the entire country.

Premium on Stock

The amount by which the sale price of a stock exceeds its par value, often occurring when investors view the company as having strong future prospects.