Differences in Inflation Rates Between Two Countries Can Explain

question 89

Multiple Choice

Differences in inflation rates between two countries can explain:

• A) short-run changes in the exchange rate but not long-run changes.
• B) changes in the real exchange rate over the long run, but not changes in the nominal exchange rate.
• C) long-run changes in the exchange rate but not short-run changes.
• D) changes in the exchange rate in both the short run and the long run.

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Definitions:

Capital in Excess

Funds received by a company from selling shares at a price above the par value, also known as additional paid-in capital.

Stock Dividend

A distribution of additional shares of a company's stock to shareholders instead of cash payouts, based on the number of shares they already own.

Retained Earnings

These are profits that a company has earned to date, less any dividends or other distributions paid to investors.

Equity Financed

Refers to the method of raising capital by selling company shares to investors.