17. Overvaluing the domestic currency relative to foreign currency will

a. discourage import substitution and exports.

b. encourage exports and discourage imports.

c. always leads to a balance of trade.

d. create a trade surplus in the local market.

18. The real exchange rate is

a. the nominal exchange rate adjusted for relative inflation rates at home and

abroad.

b. the price of foreign exchange divided by CPI of previous year.

c. the CPI divided by exchange rate of home country.

d. the weighting the nominal exchange rate index of each trading partner

1. Deepak Lal argues that development economics is dominated by a _______ approach that favors government intervention into LDC prices.

a. dirigiste.

b. Keynesian.

c. commanding heights.

d. soft budget.