Asked by Hardi Patel on Jul 24, 2024
Verified
Under a system of flexible exchange rates, an increase in the international value of a nation's currency will
A) cause an international surplus of its currency.
B) contribute to disequilibrium in its balance of payments.
C) cause gold to flow into that country.
D) improve its terms of trade.
Flexible Exchange Rates
A system under which the value of a country's currency is allowed to fluctuate according to the foreign exchange market.
International Value
The worth or significance of goods, services, or assets on a global scale, often influenced by exchange rates and international trade.
Terms Of Trade
The rate at which units of one product can be exchanged for units of another product; the price of a good or service; the amount of one good or service that must be given up to obtain 1 unit of another good or service.
- Acquire an understanding of the different exchange rate systems, such as floating, fixed, and managed floating, and their ramifications for international trade and the robustness of currency values.
- Examine the consequences of trade deficits and surpluses on a nation's economy.
Verified Answer
CG
Chelsea GaritoJul 27, 2024
Final Answer :
D
Explanation :
An increase in the international value of a nation's currency makes its imports cheaper and exports more expensive to foreigners, thus improving its terms of trade.
Learning Objectives
- Acquire an understanding of the different exchange rate systems, such as floating, fixed, and managed floating, and their ramifications for international trade and the robustness of currency values.
- Examine the consequences of trade deficits and surpluses on a nation's economy.