If Real Interest Rates Rise in the United Kingdom Relative

question 14

Multiple Choice

If real interest rates rise in the United Kingdom relative to the United States, then this event is most likely to cause the British pound to

• A) depreciate and the U.S. dollar to depreciate.
• B) depreciate and the U.S. dollar to appreciate.
• C) appreciate and the U.S. dollar to appreciate.
• D) appreciate and the U.S. dollar to depreciate.

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Definitions:

Coercion

The practice of forcing another party to act in an involuntary manner by use of threats, intimidation, or some other form of pressure or force.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by an economy in a given year in constant prices.

Advanced Economy

A term used to describe countries with a high level of income per capita and industrial development, along with a high Human Development Index (HDI).

Economic Growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.