The Foreign Exchange Market Is Stable (Able to Correct a Trade

question 20

Multiple Choice

The foreign exchange market is stable (able to correct a trade deficit by a depreciation of the nation's currency) if ____________________

• A)the sum of the absolute values of price elasticities of the US demand for imports and the foreign demand for US exports is greater than one.
• B)the sum of the absolute values of price elasticities of the US demand for imports and the foreign demand for US exports is less than one.
• C)the sum of the absolute values of price elasticities of the US supply of exports and the foreign supply of imports is greater than one.
• D)the sum of the absolute values of price elasticities of the US supply for imports and the foreign demand for US exports is less than one.

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Definitions:

Coupon Rate

The interest rate on a bond paid by the issuer, expressed as a percentage of the bond's face value.

Coupon Bond

A type of bond that pays the holder a fixed interest rate (coupon) over the bond's life, with the principal repaid at maturity.

Interest-Rate Risk

The risk that an investment's value will change due to a change in the absolute level of interest rates.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, representing the income investors will receive.