According to Historical Data, What Is the Effect of a Sharp

question 86

Multiple Choice

According to historical data, what is the effect of a sharp change in the current account on the exchange rate (both in the short and long run) ?

• A) At first, home currency will depreciate as CA balance falls, but over time, currency will begin to depreciate.
• B) At first, home currency will appreciate as CA balance falls, but over time, currency will begin to depreciate.
• C) At first, home currency will appreciate as CA balance rises, but over time, currency will begin to depreciate.
• D) At first, home currency will depreciate as CA balance falls, but over time, currency will begin to appreciate.
• E) At first, home currency will appreciate as CA balance falls, but over time, currency will begin to appreciate.

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Definitions:

Debt To Total Assets Ratio

A financial ratio that measures the percentage of a company's assets financed by creditors through debt, indicating financial leverage.

Leverage

The use of borrowed funds to increase the potential return of an investment.

Average Inventory

The mean value of a company's inventory over a specific period of time, used to calculate cost of goods sold and other financial metrics.

Days In Inventory

Days in inventory is a financial metric that measures the average number of days a company holds inventory before selling it, indicating the efficiency of inventory management.