When the Value of the Dollar Decreases, the Net Effect

question 187

Multiple Choice

When the value of the dollar decreases, the net effect on the economy

• A) will be an increase in short-run aggregate supply and a decrease in aggregate demand.
• B) will be decrease in short-run aggregate supply and an increase in aggregate demand.
• C) will be an increase in both aggregate demand and aggregate supply.
• D) will be a decrease in both aggregate demand and aggregate supply.

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Definitions:

Unrealized Loss

A financial situation where an investment holds a lower market value than its purchasing price, yet the investor has not actually sold it to incur a realized loss.

Amortized Cost

The initial investment cost adjusted for amortization or depreciation over the period of the investment.

Effective Interest Rate

The real cost of borrowing after adjusting for compounding interest and all fees. It provides a more accurate representation of the actual financial charge associated with a loan.

Trading Security

A financial instrument that is bought and sold for the purpose of generating profits on short-term fluctuations in price.