If Equilibrium Is Present in the Foreign Exchange Market and a Nation

question 43

Multiple Choice

If equilibrium is present in the foreign exchange market and a nation is experiencing a trade surplus,

• A) the nation must be experiencing a net capital inflow.
• B) the nation must be experiencing a net capital outflow.
• C) the nation's inflation rate must increase.
• D) the nation's interest rate must increase.

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Definitions:

Independent

Two variables are independent if the occurrence or change in one variable does not affect the occurrence or change in the second variable.

Probability Distribution

A function in mathematics that determines the probability of each possible outcome in an experimental scenario.

Random Variable

A variable whose possible values are outcomes of a random phenomenon.

V(X + Y)

The variance of the sum of two random variables, considering both their individual variances and covariance.