Under managed floating exchange rates if the rate of inflation in the United States is less than the rate of inflation of its trading partners the dollar will likely ?
Correct answer: A. appreciates against foreign currencies
- A. appreciates against foreign currencies
- B. depreciates against foreign currencies
- C. be officially revalued by the government
- D. be officially devalued by the government
Explanation
Lower U.S. inflation makes U.S. goods relatively cheaper than those of its trading partners, increasing demand for U.S. exports and dollars. Under a managed float, this pressure normally causes the dollar to appreciate rather than prompting an official revaluation.
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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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