When the Real Exchange Rate of a Country's Currency Is

question 86

Multiple Choice

When the real exchange rate of a country's currency is low,the home country will find it

• A) easier to import,while domestic producers will have difficulty exporting.
• B) easier to export,while domestic residents will buy more imports.
• C) harder to export,while domestic residents will buy fewer imports.
• D) easier to export,while domestic residents will buy fewer imports.
• E) harder to export,while domestic residents will buy more imports.

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Definitions:

Forward Rate

A term in finance that refers to the future interest rate agreed upon in a forward contract, or the rate used to discount a future financial transaction.

Stock Market

A public market for buying and selling company stock and derivatives at an agreed price; it is a key indicator of the health of an economy.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a given period, used as a broad measure of economic performance.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield on government securities such as U.S. Treasury bills.