If the Fed Raises the Federal Funds Rate So That

question 96

Multiple Choice

If the Fed raises the federal funds rate so that the exchange rate rises, then imports ________ and exports ________.

• A) increase; increase
• B) increase; decrease
• C) decrease; increase
• D) decrease; decrease

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Definitions:

Return

Total monetary flow of an asset as a fraction of its price.

Investment

The action or process of allocating resources, usually money, with the expectation of generating an income or profit.

Real Discount Rate

The rate used to discount future cash flows to their present value, adjusting for inflation.

Nominal Discount Rate

The rate of interest quoted or advertised on a loan or investment, not adjusted for inflation.