An Increase in the Real Exchange Rate Indicates That

question 32

Multiple Choice

An increase in the real exchange rate indicates that:

• A) domestic goods are now relatively more expensive.
• B) domestic goods are now relatively cheaper.
• C) foreign goods are now relatively cheaper.
• D) Both A and C.
• E) Both B and C.

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Definitions:

Par Value

The nominal or face value of a stock or bond, which is the original value assigned when the security is issued.

Yield Curve

A graph showing the relationship between interest rates of bonds of equal credit quality but different maturities, often indicating economic expectations.

Short-Term Rates

The interest rates on debt securities that mature in the short term, often less than one year, which are a key indicator of the monetary policy stance of an economy.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining the stability of the financial system, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.