If Real Interest Rates in the United States Rise Relative

question 62

Multiple Choice

If real interest rates in the United States rise relative to real interest rates in other countries, other things being equal,

• A)​the exchange value of the dollar would decline relative to other currencies.
• B)​the exchange value of the dollar would increase relative to other currencies.
• C)​there would likely be no effect on the exchange value of the dollar relative to other currencies.
• D)​there would be an indeterminate effect on the exchange value of the dollar relative to other currencies.

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Definitions:

Equity Accounted Balance

A valuation method for the recognition of investments in associates, where the investment is initially recorded at cost and adjusted for the investor’s share of the net profit or loss of the investee.

Profit/(Loss)

The financial result of a company's operations and activities over a specific period, indicating net earnings or losses.

Associate Losses

Losses incurred from an investment in an associate, an entity over which the investor has significant influence but not control.