A Higher Interest Rate

question 14

Multiple Choice

A higher interest rate

• A)causes the exchange rate to increase, which causes the share of net exports to rise.
• B)causes the exchange rate to fall, which results in a decline in the share of net exports.
• C)causes the exchange rate to fall, which causes the share of net exports to rise.
• D)causes the exchange rate to increase, which results in a decline in the share of net exports.
• E)has an uncertain effect on both exchange rates and the share of net exports.

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Definitions:

Partial Equity Method

A variation of the equity method in accounting, where the investor recognises income from the investee to the extent of dividends received, with some adjustments.

Initial Value Method

An accounting method which records assets and investments at their original purchase cost.

Lower-of-Cost-or-Market-Value

An accounting principle requiring that inventory be recorded at the lower of either its historical cost or its current market value.

Book Value

The value of an asset as reported on a company's balance sheet, calculated as the cost of the asset minus any accumulated depreciation.