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.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
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.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
Suppose that rising U.S income leads to higher sales and profits in the United States This would likely result in ?
Suppose that the purchasing power parity estimate of the dollar/euro exchange rate is $1.30 per euro, and the current spot rate is $1.3 8 per euro. Comparing these two exchange rates from a long-run viewpoint you would ?
Consulting firms that use large-scale econometric models to forecast exchange rate movements are engaging in ?
Given a system of floating exchange rates rising income in the United States would trigger a (an) ?
For the United States suppose the annual interest rate on government securities equals 8 percent while the annual inflation rate equals 4 percent, For Switzerland the annual interest rate on government securities equal 10 percent while the annual inflation rate equals 7 percent the above variables would cause investment funds to flow from ?
The exchange value of the U.S dollar is primarily determined by ?