If Real Interest Rates in the United States Fell, with the Dollar

question 11

Multiple Choice

If real interest rates in the United States fell, with the dollar initially trading for 9 French francs, which of the following scenarios might be observed?

• A) The value of the dollar might climb to 9.5 francs before falling back to 9.25 francs.
• B) The value of the dollar might fall immediately to 8.5 francs and then continue downward more slowly to a new equilibrium of 8.25 francs.
• C) The value of the dollar might fall to 8.5 francs before recovering partially to 8.82 francs.
• D) The value of the dollar might hold in the neighborhood of 9 francs while domestic prices adjusted over the long term.
• E) None of the above.

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Definitions:

Correct Responses

Answers or actions that are deemed accurate or appropriate in a given situation, often determined by a set of rules or guidelines.

Negative Punishment

A behavior modification technique involving the removal of a desirable stimulus to decrease the likelihood of a behavior's recurrence.

Positive Punishment

A decrease in behavior that results from an added consequence.

Negative Reinforcement

The strengthening of a behavior because a negative condition is removed or avoided.