If Real Interest Rates in the United States Are Higher

question 64

Multiple Choice

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

• A) The dollar will depreciate; the current account will move toward a deficit.
• B) The dollar will depreciate; the current account will move toward a surplus.
• C) The dollar will appreciate; the current account will move toward a deficit.
• D) The dollar will appreciate; the current account will move toward a surplus.

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Definitions:

Bankruptcy

A legal proceeding involving a business or individual that is unable to repay outstanding debts, leading to the disposition of assets to pay creditors.

Equitable Remedies

Non-monetary judicial remedies, such as injunctions or specific performance, granted when traditional legal remedies are inadequate to resolve a dispute fairly.

Adequate Remedies

Legal solutions or compensation that are considered sufficient to remedy a breach of contract or violation of rights.

Commercial Impracticability

A doctrine in contract law allowing parties to be released from their obligations due to unforeseen events that make execution of the contract excessively burdensome.