Suppose That S₀^$/SFr = $1

question 18

Multiple Choice

Suppose that S₀^$/SFr = $1.27/SFr and F₁^$/SFr = $1.28/Sfr for exchange between U.S. dollars and Swiss francs. These prices indicate that ______.

• A) nominal interest rates are higher in the U.S. than in Switzerland
• B) the inflation rate in Switzerland is declining
• C) the Swiss franc has recently risen in relation to the dollar
• D) the Swiss franc is expected to fall in value relative to the dollar
• E) it is not possible to claim that any of the above are true without additional information

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Definitions:

MPC (Marginal Propensity To Consume)

The proportion of an additional income that an individual tends to spend on consumption rather than saving.

GDP

Gross Domestic Product refers to the total monetary value of all goods and services produced within a country's borders in a given time frame, serving as an indicator of its economic performance.

Public Debt

The total amount of money that a government has borrowed and still owes.

Federal Budget Deficit

The financial shortfall when a government's expenditures exceed its revenues in a given fiscal year.