Other Things the Same, Which of the Following Responses Would

question 195

Multiple Choice

Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?

• A)Your aunt puts more money in her savings account.
• B)Foreign citizens decide to buy fewer U.S.bonds.
• C)You decide to purchase a new oven for your cookie factory.
• D)More people decide to purchase a home using a mortgage loan.

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Definitions:

Cash Flow Hedge

A hedging strategy used to manage risk associated with variability in cash flows, typically related to interest rates or currency exchange rates.

Inventory Purchase

The process of acquiring goods that a company will sell to customers or use in the production of goods to be sold.

Forward Contract

A financial derivative that represents an agreement to buy or sell an asset at a pre-agreed future point in time at a specified price.

Spot Rate

The current exchange rate at which a currency can be bought or sold for immediate delivery.