1.Appreciation of the domestic currency will

a. increase domestic aggregate demand.

b. decrease domestic aggregate supply.

c. decrease domestic aggregate demand, and possibly increase domestic aggregate supply.

d. cause a deterioration in the trade balance, but have no effect on aggregate supply or demand.

2.In the current exchange rate arrangements of IMF members,

a. a substantial number of countries do not have a freely floating exchange rate.

b. the European Union countries fix their exchange rates against the US dollar.

c. no countries are tied or "pegged" to the US dollar.

d. no developing country allows its currency to "float."

3.The effectiveness of monetary policy in influencing national income will, under a system of fixed exchange rates, be ________ under a system of flexible exchange rates.

a. greater than

b. less than

c. perhaps greater than, perhaps less than

d. the same as

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The detailed answer for the above question is provided below c decrease domestic aggregate demand an... View the full answer