If Interest Rates in the United States Are Higher Than

question 8

Multiple Choice

If interest rates in the United States are higher than interest rates in Europe, what is most likely to happen?

• A)Supply of dollars will increase, causing appreciation of the dollar.
• B)Supply of euros will increase, causing appreciation of the euro.
• C)Demand for dollars will increase causing appreciation of the dollar.
• D)Demand for dollars will decrease, causing depreciation of the dollar.

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Definitions:

Variable Inputs

Inputs in production that change in quantity depending on the level of output, such as raw materials and labor.

Marginal Cost

The expense associated with manufacturing an extra unit of a product or service.

Average Fixed Cost

is calculated by dividing the total fixed costs of production by the quantity of output produced, showing the cost per unit of output.

Total Variable Cost

The sum of all variable expenses related to the production of goods or services, which vary with the level of output.