Question #11
Reading: Reading 5 Currency Exchange Rates - Understanding Equilibrium Value
PDF File: Reading 5 Currency Exchange Rates - Understanding Equilibrium Value.pdf
Page: 5
Status: Unattempted
Correct Answer: A
Part of Context Group: Q11-13
First in Group
Shared Context
Question
For this question only, assume that the United States has a current account surplus versus the U.K. The amount by which the GBP/$ has to change to restore current account balance is least likely to depend on:
Answer Choices:
A. the initial level of current account surplus
B. the projected current account deficit
C. the response of import and export demand to changes in export prices
Explanation
The adjustment to exchange rates to restore current accounts to a balanced position
depends on:
The level of initial deficit.
The response of import and export demand to changes in import and export prices.
The response of import and export prices to changes in the exchange rate.