If Inflation Increases Substantially in Australia While U

question 33

Multiple Choice

If inflation increases substantially in Australia while U.S. inflation remains unchanged, this is expected to place ____ pressure on the value of the Australian dollar with respect to the U.S. dollar.

• A) upward
• B) downward
• C) either upward or downward (depending on the degree of the increase in Australian inflation)
• D) none of the above; there will be no impact

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Definitions:

Systematic Risk

The risk inherent to the entire market or a whole market segment, which cannot be mitigated through diversification alone.

Opportunity Sets

The array of possible investment opportunities or combinations that are available to an investor.

Systematic Risk Principle

A principle stating that investors need to be compensated for taking on increased levels of undiversifiable risk.

Not Correlated Stocks

Stocks whose price movements are independent of each other, indicating no direct relationship in their performance.