The Credibility Theory of EMS Had as an Effect

question 56

Multiple Choice

The credibility theory of EMS had as an effect

• A) the inflation rates of member countries converging to the low German levels, a result that was not matched by similar countries who did not fix their exchange rates.
• B) the inflation rates of member countries failing to converge to the low German levels.
• C) the inflation rates of member countries converging to the low German levels, but other countries including U.S. and Britain also reduced inflation in this time period without fixing exchange rates.
• D) the inflation rate in Germany rose to match the inflation rates of other member countries.
• E) the inflation rate in the U.S. dropped to the low German levels.

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Definitions:

Effective Interest Amortization

A method of allocating loan interest payments over the life of the loan, taking into account the varying principal amounts.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, typically expressed as an annual rate.

Bond's Life

The period from the issuance of a bond until it matures and the principal is repaid.

Market Rate

The prevailing price or interest rate available in the open market for goods, services, or securities.