EC-100 Pretest

Which of the following is an advantage of a weak dollar:

it encourages exports

What tends to occur when a country is experiencing political instability?

it's currency loses value

In a floating exchange rate system, currency values are determined by

changes in supply and demand

A nation's currency exchange rate is likely to increase when

consumer confidence is high

What is the benefit to the United States if the value of the U.S. dollar is weaker than other world currencies?

exports increase

A country with an established, steady economy is most likely to use a __________ exchange rate.

floating

If a country exports more than it imports, the demand for that country's currency will likely

increase

A developing country sets its currency to be the same value as the U.S. dollar. This is called a(n)

pegged currency

Which of the following factors is most likely to cause a country's currency value to fall:

rapid inflation

The value of a currency in a floating exchange rate system is determined by

supply and demand