What are the three main exchange rate systems, and how do they operate?
What will be an ideal response?
The three main exchange rate systems are the floating exchange rate, the fixed exchange rate, and the managed float. The floating exchange rate is determined solely by equilibrium of demand and supply in the foreign exchange market. The fixed exchange rate exists when the government maintains one fixed rate at which currency can be exchanged. Under a managed float, the exchange rate is mostly determined by demand and supply in the market for foreign exchange, with occasional government intervention.
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A disadvantage of having an annually balanced budget is that government spending would have to: a. allow the national debt to burgeon with chronic deficits
b. decline during a recession to offset the increase in tax revenues. c. rise during a recession to match the increase in tax revenues. d. rise during an expansion to offset the decline in tax revenues. e. decline in a recession to match the decrease in tax revenues.
The Phillips Curve depicts that, in general:
A. high amounts of unemployment in an economy will coincide with low inflation. B. low amounts of unemployment in an economy will coincide with low inflation. C. high amounts of unemployment in an economy will coincide with high inflation. D. high amounts of output in an economy will coincide with low inflation.