A common argument for fixed exchange rates is that they
A) give central banks greater freedom in adjusting their economy's level of output.
B) forever free the central bank from have to adjust the exchange rate to fundamental changes in the economy.
C) make trade more costly, and thus encourage domestic citizens to buy domestically produced output.
D) all of the above
E) none of the above
E
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Suppose that Alyssa spends all her income on video games and DVDs and her marginal utility per dollar from video games equals that from DVDs. Is Alyssa maximizing her utility? Now, suppose that the price of a DVD falls
Should Alyssa change the combination of goods she consumes? If yes, how? Explain.
Suppose the market equilibrium price of wheat is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action?
a. There will be a shortage of wheat. b. There will be a surplus of wheat. c. There will be an increase in the quantity of wheat demanded as the result of the price floor. d. There will be a decrease in the quantity of wheat supplied as the result of the price floor.