In the Long Run,foreign Exchange Rates Are Determined By

question 21

Multiple Choice

In the long run,foreign exchange rates are determined by:

• A) an agreement between governments of the major industrial countries.
• B) economic fundamentals, such as productivity levels or price levels in different countries.
• C) the difference between the short-term and long-term interest rates in each country.
• D) the rate at which each country's currency can be exchanged for gold.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, giving more weight to some values.

Ordinary Shares

Equity securities representing ownership in a company, giving the shareholder voting rights and a share in the company's profits through dividends.

Dilutive Potential

The possibility that the issuance of additional securities could decrease earnings per share or decrease an ownership interest.

After-tax Effect

The impact of taxes on a company's financial transactions, typically focusing on the net result after accounting for the taxation impact.