In 1995, Newt Gingrich, the Speaker of the U

question 103

Multiple Choice

In 1995, Newt Gingrich, the Speaker of the U.S. House of Representatives, threatened to send the United States into default on its debt. During the day of this announcement, U.S. interest rates rose and the real exchange rate of the U.S. dollar depreciated. Which of the following changes is consistent with the results of the open-economy macroeconomic model?

• A)a fall in U.S. interest rates and an increase in net capital outflow
• B)an appreciation of the real exchange rate of the U.S. dollar
• C)an increase in U.S. interest rates and a depreciation of the U.S. dollar
• D)an appreciation of the U.S. dollar and an increase in U.S. net capital outflow

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Definitions:

Persuasive Advertising

Advertising aimed at convincing consumers to purchase a product or service through appeals to emotions or logic.

Monopoly Power

The ability of a single seller to control market prices and exclude competitors within a particular market.

Product Differentiation

A marketing strategy that businesses use to distinguish their products from those of competitors, based on attributes like quality, design, or features.

Monopolistic Competition

A market structure characterized by many firms selling products that are substitutes but not perfect substitutes, leading to differentiated competition.