The Following Figure Shows the Net Exports Curve for a Country

question 91

Multiple Choice

The following figure shows the net exports curve for a country:

-Refer to the figure above.When the real exchange rate is below R*,________.

• A) net exports are negative
• B) net exports are positive
• C) net exports are zero
• D) net exports can be positive or negative depending on the value of R*

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Definitions:

Return and Risk-Free Rate

The difference between the total return on an investment and the risk-free rate of return, indicating the excess compensation for taking on risk.

Beta

An assessment of how much a security fluctuates in comparison to the general market.

Regression Equation

An equation that describes the relationship between a dependent variable and one or more independent variables.

CAPM

The Capital Asset Pricing Model, a formula used to determine the expected return on an investment, factoring in risk and the time value of money.