Suppose US

question 111

Multiple Choice

Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market?

• A) The U.S. overall demand for foreign exchange, and British pounds, in particular, will increase.
• B) The U.S. overall demand for foreign exchange, and British pounds, in particular, will decrease.
• C) The U.S. demand for British pounds will increase, but the overall demand for foreign exchange will probably decrease.
• D) The U.S. demand for British pounds will decrease, but the overall demand for foreign exchange will probably increase.

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Definitions:

Effective Interest

The actual interest rate earned or paid on an investment or loan over a specified period, taking into account the effect of compounding.

Compounded Monthly

Interest calculation method where interest earned is added to the principal sum each month, increasing the total amount on which future interest is computed.

Time Value

A concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.