Monetary policy is very effective under a fixed exchange rate policy. 1. Answer: 2. A revaluation switches expenditures from foreign to domestic commodities and can be used to correct a deficit in the nation's balance-of-payments Answer: 3. The foreign exchange market for any currency is composed of all the locations where the currency is bought and sold for other currencies Answer: 4. Under flexible exchange rates, a trade deficit is automatically corrected by a deprecation of the deficit nation's currency. Answer: 5. Financial reserve assets are excluded from the capital account because changes in reserves reflect government policy rather than market forces. Answer:

Monetary policy is very effective under a fixed exchange rate policy. 1. Answer: 2. A revaluation switches expenditures from foreign to domestic commodities and can be used to correct a deficit in the nation's balance-of-payments Answer: 3. The foreign exchange market for any currency is composed of all the locations where the currency is bought and sold for other currencies Answer: 4. Under flexible exchange rates, a trade deficit is automatically corrected by a deprecation of the deficit nation's currency. Answer: 5. Financial reserve assets are excluded from the capital account because changes in reserves reflect government policy rather than market forces. Answer:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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