From Mid-2008 Through Early 2009, the Dollar's Value Moderately Increased

question 33

Multiple Choice

From mid-2008 through early 2009, the dollar's value moderately increased against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. What caused this phenomenon?

• A) High real interest rates in the United States compared to any other developed region in the world sparked an inflow of funds into the country.
• B) U.S. assets were characterized by a high-risk, high-return payoff which prompted foreign investors to park their funds.
• C) Foreign investors were excited at the possibility of high returns following the government bail-out of financial institutions.
• D) Foreign investors put their money in low-risk U.S. assets such as low-yielding U.S. government bonds.
• E) Foreign investors saw opportunities in the United States as the level of indebtedness had begun declining.

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Definitions:

Contingent Liability

A potential financial obligation that may arise in the future, depending on the outcome of a specific event.

Liabilities

Financial obligations or debts that an entity owes to others, which must be settled in the future through the transfer of assets or services.

Provisions

Liabilities of uncertain timing or amount, set aside in anticipation of future obligations or costs.

Present Obligation

A duty or responsibility that exists at the reporting date, typically requiring an outflow of resources.