When exchange rates are volatile:
A) firms are assured that they will be able to earn profits from currency swings.
B) firms engage in more trade.
C) trade and cross-border financial and labor flows are reduced as uncertainty and transaction costs take their toll.
D) international economic activity is increased.
Ans: C) trade and cross-border financial and labor flows are reduced as uncertainty and transaction costs take their toll.
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What is the range of the required reserve ratio?
a. Between 0 and 2 b. Between 0 and 1 c. Between 0 and 100 d. Between 0 and infinity e. Between 0 and 10
When an American household purchases a bottle of Italian wine for $100,
a. U.S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by $100. b. U.S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by $100. c. U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change. d. U.S. consumption increases by $100, U.S. net exports do not change, and U.S. GDP increases by $100.