Which of the Following Does NOT Occur When a Country

question 4

Multiple Choice

Which of the following does NOT occur when a country with floating exchange rates increases the money supply?

• A)Interest rates fall causing capital outflows in the short run.
• B)Interest rates initially increases causing real spending, production, and income to fall.
• C)The current account will initially tend to worsen as a result of the decrease in interest rates.
• D)Aggregate demand will increase which will lead to an increase in the price level.

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Definitions:

Specific Assets

Assets that are designated for a particular use or service within a business, often tailored to particular operational requirements.

Appreciation

The increase in the value of an asset over time, which can affect investments, real estate, and other properties due to a variety of factors such as demand and inflation.

Default Risk

The risk that a borrower will not make the required payments on their debt obligations.

U.S. Treasury Bonds

Long-term government debt securities issued by the United States Department of the Treasury with maturity periods over 20 years, offering a fixed interest rate.