If There Is a Fixed-Exchange-Rate System, Then in the Short

question 60

Multiple Choice

If there is a fixed-exchange-rate system, then in the short run described by the Mundell-Fleming model:

• A) the nominal exchange rate is fixed, but the real exchange rate is free to vary.
• B) the real exchange rate is fixed, but the nominal exchange rate is free to vary.
• C) both the nominal and real exchange rates are fixed.
• D) the nominal exchange rate is fixed, but whether the real exchange rate is fixed depends on whether the central bank follows a rule of constant growth of the money supply.

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Definitions:

Median

The middle value in a data set, which divides the data into two halves when arranged in order.

Mean

The arithmetic average of a set of numbers, calculated by dividing the sum of all the values by the count of numbers.

Range

The difference between the highest and lowest values in a set of numbers.

Normal Model

A probability distribution that is symmetrical about its average, indicating that occurrences close to the mean are more common than those further away.