Assume a System of Floating Exchange Rates

question 24

Multiple Choice

Assume a system of floating exchange rates.In response to relatively high interest rates abroad,suppose domestic investors place their funds in foreign capital markets.The result would be

• A) a depreciation of the domestic currency and a rise in net exports
• B) a depreciation of the domestic currency and a fall in net exports
• C) an appreciation of the domestic currency and a rise in net exports
• D) an appreciation of the domestic currency and a fall in net exports

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Definitions:

Legal Device

A legal tool or method used to meet a requirement, enforce a right, or manage a legal process.

Hostile Takeover

A situation where a company is acquired by another company without the consent of the former company's management.

Poison Pill

A strategy used by companies to prevent or discourage hostile takeovers by making the company less attractive to the potential acquirer.

Controlling Interest

Ownership of a sufficient portion of a company's stock (commonly 50% plus one share) to influence or control its management and decisions.