Which of the following is an argument of opponents of devaluations? Select one:

Question

Which of the following is an argument of opponents of devaluations?

Select one:

a. Participants in foreign exchange markets have a short memory: if the expected devaluation doesn't occur within a short time-period, they will stop expecting it.

b. Devaluations allow output to return to its natural level quickly.

c. Devaluations cause relatively slow adjustments.

d. A devaluation causes a nation with fixed exchange rates to lose credibility in the medium run, driving its interest rate higher.

e. Both B and C.

Explanation / Answer

The correct option is a), because this will lead to increased expectation about devaluation and if it occurs in the near future then it will not have an impact on the economy.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.