In Canada,proponents of a Flexible Exchange Rate Argue That the Flexible

Multiple Choice

In Canada,proponents of a flexible exchange rate argue that the flexible exchange rate acts as a "shock absorber." By this,they mean that

A) negative shocks to the Canadian economy will be fully absorbed by a depreciation of the dollar,causing net exports to rise.
B) a flexible exchange rate protects Canadian exporters from increases in the prices of their products in the rest of the world.
C) flexible exchange rates allow for more certainty with regard to the profitability of international transactions,which dampens negative effects on output and employment.
D) external shocks to the Canadian economy can be partially absorbed by fluctuations in the exchange rate,which dampen the effect of the shock on output and employment.
E) positive shocks to the Canadian economy will be fully absorbed by an appreciation of the dollar,causing net exports to fall.