Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 42, Problem 3MCQ
To determine
The correct option for the exchange rate changes between the Euro and dollar if the aggregate price level falls.
Expert Solution & Answer
Answer to Problem 3MCQ
Option d is correct.
Explanation of Solution
Explanation for the correct option:
d
The changes in aggregate price level may cause exchange rates between Euro and the dollar to increase, decrease or remain unchanged. Therefore, option d is correct.
Explanation for incorrect options:
a.
The effect of the decrease in aggregate price level may change the exchange rate positively or negatively or it may remain unchanged. Therefore, option a is the incorrect answer.
b.
It may decrease but also increase at the same time. Therefore, option b is incorrect.
c.
It may increase or decrease or remain the same. Therefore, option c is incorrect.
e.
It will be changed if the aggregate price level falls. Therefore, option e is incorrect.
Economics Concept Introduction
Foreign Exchange rate: The rate at which currencies of two different countries are exchanged. In other words, it is the rate at which one currency is exchanged with the other currency.
Chapter 42 Solutions
Krugman's Economics For The Ap® Course
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