If a Country's Currency Is Expected to Get Stronger, One

question 130

Multiple Choice

If a country's currency is expected to get stronger, one would expect the forward rate (expressed as a direct quote) to ____.

• A)sell above the spot rate
• B)sell below the spot rate
• C)sell on the spot
• D)remain steady at the current spot rate

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Definitions:

Diminishing Marginal Productivity

A principle in economics that indicates that as one inputs more of a factor of production while holding other factors constant, the additions to output will eventually decrease.

Output

The quantity of goods or services produced in a given period by a firm, industry, or country.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, typically characterized by a reduction in per-unit cost with increasing output.

Specialization

The process by which individuals, firms, or countries focus on producing a certain type of goods or services, often to achieve greater efficiencies or quality.