Which of the Following Can Help to Explain Why Higher

question 46

Multiple Choice

Which of the following can help to explain why higher inflation may lead to currency appreciations?

• A) The interest rate is not the prime target of monetary policy.
• B) Most central banks adjust their policy interest rates expressly so as to keep inflation in check.
• C) Central banks increase the money supply leading to overshooting of the exchange rate.
• D) Inflation will increase the purchasing power of a currency.
• E) The world market does not adjust their currency trade to reflect inflation.

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Definitions:

Bonus Money

Bonus money is additional compensation awarded to employees for achieving predefined goals, exceeding performance expectations, or as a reward for exceptional work.

Cognitive Dissonance

A psychological phenomenon where an individual experiences discomfort due to holding conflicting beliefs, values, or attitudes.

Ingratiation

A social influence strategy where an individual tries to make themselves more likable to another.

Politics

The activities associated with the governance of a country or other area, especially the debate or conflict among individuals or parties having or hoping to achieve power.