The correct option for the type of exchange rate regimes in the country U.
Answer to Problem 2MCQ
Option a is correct.
Explanation of Solution
Explanation for the correct option:
a.
A fixed exchange rate regime is followed in the country U where government ties the exchange rate of the currency with the prices of another country’s currency or gold. It is done so that fluctuations can be narrowed. Therefore, option a is correct.
Explanation for incorrect options:
b.
Floating exchange rate regime is more flexible and unstable.
c.
Fixed but adjusted frequently is not followed in the country U as the exchange rate is determined based on another country’s price or prices of gold.
d.
Exchange rate regime followed in the country U is not flexible.
e.
Floating exchange rate regime is not followed in the country U.
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 43 Solutions
Krugman's Economics For The Ap® Course
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