Under a system of floating exchange rates relatively low productivity and high inflation rates in the United States results in a (an) ?
Correct answer: A. increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
- A. increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
- B. increase in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar
- C. decrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
- D. decrease in the demand for foreign currency and increase in the supply of foreign currency and a appreciation in the dollar
Explanation
Low productivity and high inflation reduce export competitiveness and encourage imports. This raises demand for foreign currency, reduces its supply from exports, and depreciates the dollar.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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