A Sharp Depreciation of the Domestic Currency After a Currency

question 14

Multiple Choice

A sharp depreciation of the domestic currency after a currency crisis leads to ________.

• A)lower import prices
• B)lower interest rates
• C)decrease in the value of foreign currency-denominated liabilities
• D)higher inflation

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Definitions:

Dominant Strategy

In a strategic interaction (game) between two or more players, a course of action (strategy) that a player will wish to undertake no matter what the other players choose to do.

Nash Equilibrium

A concept within game theory where no player can benefit by changing strategies while the other players keep theirs unchanged.

First-Mover Advantages

Competitive benefits that accrue to the initial entrant into a market, including brand recognition and product loyalty before competitors enter.

Zero-sum Game

A situation in which one party's gain is exactly balanced by another party's loss, so the net change in wealth or benefit is zero.