Suppose the Real Exchange Rate Is Such That the Market

question 35

Multiple Choice

Suppose the real exchange rate is such that the market for foreign-currency exchange has a surplus.This surplus will lead to

• A)an appreciation of the dollar,an increase in U.S.net exports,and so an increase in the quantity of dollars demanded in the foreign exchange market.
• B)an appreciation of the dollar,a decrease in U.S.net exports,and so a decrease in the quantity of dollars demanded in the foreign exchange market.
• C)a depreciation of the dollar,an increase in U.S.net exports,and so an increase in the quantity of dollars demanded in the foreign exchange market.
• D)a depreciation of the dollar,a decrease in U.S.net exports,and so a decrease in the quantity of dollars demanded in the foreign exchange market.

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Definitions:

Probability

Probability is a measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Non-rejection

Refers to the decision in statistical hypothesis testing where there is insufficient evidence to discard the null hypothesis.

Decision Rule

Rule specifying the values of the statistic that result in the decision to reject or not reject the null hypothesis.

Region of Rejection

The range of values in hypothesis testing that leads to rejection of the null hypothesis, indicating statistical significance.