If the Fed Increases Interest Rates in the U

question 186

Multiple Choice

If the Fed increases interest rates in the U.S. relative to other nations,

• A) foreign investors are likely to transfer funds to U.S. investments.
• B) foreign investors are likely to reduce their investment in U.S. securities.
• C) foreign governments will likely reduce their interest rates further, to remain complementary to what the U.S. is doing.
• D) foreign investors will see this as a sign of a looming recession and redirect their funds to time deposits.

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Definitions:

Economy

A system by which goods and services are produced, distributed, and consumed within a society or geographical area.

Point A

A specific position or location often used in graphs or discussions about economic models and theories.

Production Possibilities Frontier

A graphical representation showing the maximum quantity of goods and services that a society can produce with its available resources and technology, when efficiently utilized.

Unemployment

The situation where individuals who are capable of working and willing to work are unable to find suitable employment.