If the Forward Exchange Rate of the Dollar in Terms

question 18

Multiple Choice

If the forward exchange rate of the dollar in terms of pounds is less than the spot exchange rate,

• A)inflation must be lower in the United States than in Britain.
• B)inflation must be higher in the United States than in Britain.
• C)market participants must be expecting the dollar to appreciate against the pound.
• D)market participants must be expecting the dollar to depreciate against the pound.

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Definitions:

Unemployment

The situation when individuals who are able and willing to work are unable to find employment.

Aggregate Demand Curve

A graphical representation of the total demand for goods and services in an economy at different price levels.

Price Level

Refers to the average of all current prices for goods and services in an economy.

Aggregate Quantity

The total amount, sum, or volume of goods or services produced or supplied in an economy at a given overall price level and time.