Suppose the Exchange Rate for the U

question 380

Multiple Choice

Suppose the exchange rate for the U.S. dollar falls. This could be caused by

• A) a decrease in U.S. import demand.
• B) an increase in the world demand for U.S. exports.
• C) an increase in the U.S. interest rate differential.
• D) a fall in the expected future exchange rate.

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Definitions:

Interest Rate

The share of a loan incurred as interest costs to the borrower, habitually depicted as an annual percentage of the loan's outstanding amount.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating the proportion of any additional dollar of income that must be paid in taxes.

Weighted Average Cost

A calculation that takes into account the varying costs of goods or services by weighting them according to their importance or quantity.

Internal Rate of Return

The discount rate that makes the net present value of all cash flows from a particular project zero.