At the Equilibrium Real Exchange Rate, the Demand for Dollars

question 20

Multiple Choice

At the equilibrium real exchange rate, the demand for dollars to buy:

• A)foreign assets exactly balances the supply of dollars to be exchanged into foreign currency to buy domestic assets
• B)net exports exactly balances the supply of dollars to be exchanged into foreign currency to buy net imports
• C)foreign assets exactly balances the supply of dollars to be exchanged into foreign currency to buy net exports
• D)net exports exactly balances the supply of dollars to be exchanged into foreign currency to buy foreign assets

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Definitions:

Bankruptcy

A legal status for individuals or entities that cannot repay the debts they owe to creditors, leading to a legal process to resolve unpaid debts.

Assets

Resources owned by individuals or companies expected to provide future benefits, including cash, properties, and investments.

Creditors

Creditors are individuals or entities to whom money is owed by debtors or borrowers.

Primary Objective Test

A rule that states a writing is not needed for enforcement if the promise to pay another party’s debt is made to obtain a gain for the guarantor.