An Increase in the Demand for British Pounds Might Result

question 121

Multiple Choice

An increase in the demand for British pounds might result from:

• A)​a reduction in the price level in the U.S.relative to Britain.
• B)​a recession in the U.S.which reduces real output.
• C)​a decline in interest rates in Britain.
• D)​a decline in interest rates in the U.S.

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Definitions:

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.

Interest Rate Risk

The potential for investment losses resulting from changes in interest rates.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks; it is used to determine a theoretically appropriate required rate of return of an asset.

Specific Risk

Risk associated with individual investments or a small group of assets, distinct from market risk.