If the Risk of Buying U

question 144

Multiple Choice

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

• A)net capital outflow and the real exchange rate will rise.
• B)net capital outflow will rise and the real exchange rate will fall.
• C)net capital outflow will fall and the real exchange rate will rise.
• D)net capital outflow and the exchange rate will fall.

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Definitions:

Groupthink

A psychological phenomenon where the desire for harmony or conformity within a group results in irrational or dysfunctional decision-making outcomes.

Feasibility

The measure of how possible or practical it is to implement a project, plan, or idea based on factors like cost, time, and resources.

Morale

The feelings of enthusiasm, loyalty, and confidence of a group or an individual.

Social Rewards Theory

A theory suggesting that people communicate to receive social rewards such as acceptance, affection, or approval.