Which of the Following Would Be Likely to Cause a Nation's

question 123

Multiple Choice

Which of the following would be likely to cause a nation's currency to depreciate?

• A) an increase in foreign demand for the nation's products
• B) a lower domestic rate of inflation than that of the nation's trading partners
• C) higher domestic interest rates
• D) higher foreign interest rates

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Definitions:

Government Spending

The total expenditure incurred by a government in funding its operations and services, including infrastructure, public services, and welfare programs.

Nominal Interest Rate

The nominal interest rate represents the rate of interest before adjustments for inflation, indicating the percentage increase in money lenders earn or borrowers pay over a specific period.

Real Interest Rate

The interest rate that has been modified to account for inflation, indicating the actual cost of borrowing or the true earnings from savings.

Inflation Rate

This is the percentage rate at which the general level of prices for goods and services is rising, eroding purchasing power.