Exchange rates are important because
A) They affect the affordability of imports
B) they make exports either more or less expensive for foreign buyers
C) They affect the value of foreign assets and their returns
D) all of the above
Ans: D) all of the above
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Refer to the table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $9:
A. the market would clear.
B. a surplus of 20 units would occur.
C. a shortage of 20 units would occur.
D. demand would change from columns (3) and (2) to columns (3) and (1).
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; raise; decline B. decline; lower; decline C. decline; lower; expand D. increase; raise; decline