Under a Fixed-Rate System,a Country That Followed Policies That Would

question 20

Multiple Choice

Under a fixed-rate system,a country that followed policies that would lead to a higher rate of inflation than that experienced by its trading partners would

• A)experience a balance-of-payments surplus as its goods became more expensive
• B)see an decrease in the supply of its currency on the foreign exchange markets
• C)find its currency subject to upward pressure
• D)experience a balance-of-payments deficit as its goods became more expensive

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Definitions:

Marginal Productivity

The additional output produced as a result of employing one more unit of a factor of production, holding all other factors constant.

Efficiency Wages

Salaries set above the market equilibrium, intended to increase productivity and efficiency by attracting better employees, reducing turnover, and motivating workers.

Above-equilibrium Wages

Wages set higher than the market equilibrium wage, often used by employers to attract better talent, reduce turnover, or motivate employees.

Better Performance

Refers to an improvement in efficiency, effectiveness, or outcomes in any given task or operation.