The Indirect Channels) Through Which Higher Exchange Rates Can Cause

question 50

Multiple Choice

The indirect channels) through which higher exchange rates can cause the central banks using a Taylor rule to lower interest rates are

• A) increased positive output gaps.
• B) higher inflation relative to targeted inflation.
• C) decreased negative output gaps.
• D) decreased positive output gaps.
• E) none of the above.

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Definitions:

Replacement Stream

A series of cash flows intended to replace the benefits of an asset or investment over time.

Payments

Payments refer to the amounts of money transferred from one party to another as compensation for goods or services, or as fulfillment of an obligation.

Compounded Quarterly

The process where interest is added to the principal sum of a loan or deposit four times a year, resulting in a higher amount of interest being accumulated than if compounded less frequently.

Equivalent Economic Position

A financial strategy or situation where two different financial instruments or situations have the same economic value or return.