CSUF Econ 335 Chapter 15 Test with Complete Solutions
CSUF Econ 335 Chapter 15 Test with Complete Solutions True or False: Fixed exchange rates tend to be used primarily by small, developing nations whose currencies are anchored to a key currency such as the U.S. dollar. - Answer-True Which of the following characterizes the operation of a managed floating exchange rate? A nation can initiate large fluctuations in its currency to improve its competitiveness. A nation can alter the degree that it intervenes in the foreign exchange market. A nation can make adjustments of par values. A nation is prevented from intervening in the exchange markets to avoid weakening its competitive position. - Answer-A nation can alter the degree that it intervenes in the foreign exchange market. Why were managed floating exchange rates adopted by the industrialized nations in 1973? Check all that apply. To enable nations to initiate fluctuations in exchange rates To enable dirty floats in order to offset free market forces of supply and demand To avoid delays in adjustments of exchange rates caused by procedural difficulties and political biases To enable more prompt and continuous adjustments of exchange rates in response to evolving market forces - Answer-To avoid delays in adjustments of exchange rates caused by procedural difficulties and political biases
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