The _____ Effect Suggests That Speculations Can Sometimes Be Destabilizing

question 8

Multiple Choice

The _____ effect suggests that speculations can sometimes be destabilizing as the actions of the international investors move the exchange rate away from the long-run equilibrium value consistent with fundamental economic influences.

• A)bandwagon
• B)overshooting
• C)exchange rate
• D)arbitrage

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Definitions:

Compounded Semi-Annually

The process of calculating interest where the interest is added to the principal sum of a loan or deposit twice a year.

Mutual Fund

A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is managed by an investment company with the capital pooled from many investors.

Rate of Total Return

A measure of the gain or loss on an investment over a specified period, including interest, capital gains, dividends, and distributions realized over the period.

Rental Income

Income received from leasing out property or other real estate assets.