Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
An appreciation of the Euro makes European exports cheaper for Songland consumers.
B
Flexible exchange rates can lead to increased aggregate demand in the partner country by influencing export prices.
C
A depreciation of the Songland dollar makes imports from Europe more expensive for Songland consumers.
D
Government intervention is necessary to maintain stable flexible exchange rates.
E
Flexible exchange rates eliminate all risks associated with international trade.
Understanding the Answer
Let's break down why this is correct
Answer
Flexible exchange rates mean that the value of a country's currency can change based on supply and demand in the foreign exchange market. This can affect international trade because when a currency weakens, exports from that country become cheaper for foreign buyers, potentially increasing sales abroad. Conversely, if a currency strengthens, imports become cheaper, which might lead to more foreign goods being purchased. For example, if the U. S.
Detailed Explanation
Other options are incorrect because People might think that if the Euro gets stronger, it makes European goods cheaper for others; Some might believe that flexible exchange rates always boost demand in partner countries.
Key Concepts
Flexible Exchange Rates
International Trade
Currency Appreciation and Depreciation
Topic
Flexible Exchange Rates
Difficulty
easy level question
Cognitive Level
understand
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