One Unpleasant Cure for the U

question 48

Multiple Choice

One unpleasant cure for the U.S.trade deficit of the 1990s would be for foreigners who hold U.S.financial assets to demand

• A)lower interest rates to stimulate U.S.growth rates.
• B)higher interest rates and generate a recession in the United States.
• C)higher interest rates and generate an appreciation of the dollar.
• D)lower interest rates and generate a depreciation of the dollar.

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Definitions:

Cumulative Abnormal Returns

The aggregate difference in an asset’s observed versus expected returns over a specific timeframe, often used to assess impact of an event.

Takeover Announcement

A public declaration that a company intends to acquire another company, often triggering changes in the stock prices of both companies involved.

Strong-form Efficient

A theory suggesting that all information, public and private, is fully reflected in stock prices, and that it is impossible to consistently achieve higher returns.

Semistrong-form Efficient

Refers to a market efficiency form where prices include all publicly available information, including both historical and newly released financial data.