Under a System of Flexible Exchange Rates, Which of the Following

question 80

Multiple Choice

Under a system of flexible exchange rates, which of the following will cause the nation's currency to depreciate in the exchange market?

• A) an increase in foreign incomes
• B) a domestic inflation rate of 10 percent while the nation's trading partners are experiencing stable prices
• C) an increase in domestic interest rates
• D) a reduction in interest rates abroad

---

Definitions:

Date of Declaration

The specific date on which a company's board of directors announces the distribution of a dividend or other corporate action.

Marketable Equity Securities

Financial instruments that represent ownership in public companies and can be easily bought or sold in public stock markets.

Realized Gain

Profit resulting from the sale of an asset or investment for more than its purchase price.

Stock Dividend

A disbursement from a corporation to its shareholders, using shares as the medium instead of cash.