Suppose North American and European Interest Rates Have Been the Same

question 24

Multiple Choice

Suppose North American and European interest rates have been the same. A sharp,permanent increase in US interest rates to levels above those of America's trade partners can be expected to cause

• A) the long term nominal value of the dollar to be lower than it otherwise would be
• B) an immediate decline in the spot market value of the dollar
• C) gradual appreciation of the dollar over many years, until it reaches its new long run value
• D) an immediate jump in the dollar's spot market value, followed by subsequent depreciation
• E) no change in the real, long term exchange rates

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Definitions:

Guidelines

Recommended practices or principles aimed at steering decisions or actions, usually based on evidence or expert consensus.

Direct Evidence

Evidence that directly proves a fact without the need for any inference or presumption, such as testimony from a witness about what they personally observed.

Circumstantial Evidence

Evidence that relies on an inference to connect it to a conclusion of fact, such as a fingerprint at the scene of a crime, rather than direct evidence like eyewitness testimony.

Existence

The state or fact of being real, present, or in operation.