For a Major Country with Extensive Capital Flows, What Is

question 176

Multiple Choice

For a major country with extensive capital flows, what is the effect of an increase in interest rates?

• A)a currency depreciation and increased net exports 
• B)a currency depreciation and reduced net exports 
• C)a currency appreciation and increased net exports 
• D)a currency appreciation and reduced net exports

---

Definitions:

Financial Market Panic

refers to a sudden and widespread fear among investors, leading to rapid selling of securities and a sharp decline in market prices.

Rate of Return

Rate of Return is a measure of the profitability of an investment, calculated as the percentage of the total amount returned in relation to the original investment made.

US Dollar

The official currency of the United States, widely used as a standard unit of currency in international finance and trade.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months.