Sometimes a Change in the Real Effective Multilateral Exchange Rate

question 96

Multiple Choice

Sometimes a change in the real effective multilateral exchange rate has the opposite result from what one would expect. One explanation may be that:

• A) buying habits are very strong and firms and consumers continue their behavior despite large changes in prices of imports.
• B) price changes do not bring about immediate responses in import or export volume because of contracts, or firms' difficulty in changing suppliers quickly.
• C) the theory is fundamentally flawed and does not predict well.
• D) there are other factors we are not considering that affect the trade balance.

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Definitions:

Psycho-Emotional Development

The aspect of development that involves the growth of psychological and emotional capabilities and functioning.

Social Development

The process by which individuals acquire the values, behaviors, and social skills necessary for functioning effectively in society.

Decrease in Risk-Taking Behavior

denotes a reduction in engaging in actions that involve significant risks or dangers, often seen as a positive behavioral change.

Gang Membership

Affiliation or involvement with a group that often engages in criminal activities and operates with a certain level of organization and identity.