In a Small Open Economy with a Floating Exchange Rate

question 126

Multiple Choice

In a small open economy with a floating exchange rate, the exchange rate will appreciate if:

• A) the money supply is increased.
• B) the money supply is decreased.
• C) government spending is decreased.
• D) taxes are increased.

---

Definitions:

Advertisers

Entities that promote goods, services, or ideas through various media to persuade potential customers to respond or buy.

Brand Loyalty

The tendency of consumers to continuously purchase one brand's products over another, reflecting a preference based on perception of the brand's value.

Elastic

Describes a situation in economics where the quantity demanded or supplied of a good changes significantly in response to a change in price.

Inelastic

Describes a situation where the demand or supply for a good or service is relatively unaffected when the price changes.