Which of the following is a drawback of a floating exchange-rate system?
A. Adverse foreign trade shocks are especially damaging since any intervention by the central bank adds to the recession.
B. Overshooting of exchange rates may cause excessive resource shifts into and out of trade-oriented industries.
C. Inflation is fully transmitted from one country having a higher rate of inflation to another one having a lower rate.
D. Monetary policy is ineffective in raising aggregate demand since it cannot be directed toward achieving internal balance.
Answer: B
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Bagels and cream cheese are complementary goods. Suppose that the price for flour, which is used to produce bagels, increases. The equilibrium price of cream cheese ________, and the equilibrium quantity of cream cheese ________
A) does not change; does not change B) falls; decreases C) falls; increases D) rises; increases E) rises; decreases
A decrease in the marginal factor cost of labor will
A) lead to an decrease in the quantity demanded of labor. B) induce a firm to hire fewer workers. C) induce a firm to hire more workers. D) cause the value of the marginal product of labor to decrease.