If the US Interest Rate, Adjusted for People's Expectation of Inflation, Increases

question 173

Multiple Choice

If the U.S. interest rate, adjusted for people's expectation of inflation, increases sharply relative to the rest of the world, then

• A) there will be a decrease in the demand for dollars in foreign exchange markets.
• B) there will be no change in the demand for dollars in foreign exchange markets but there will be an increase in demand for foreign currency.
• C) the dollar will appreciate.
• D) the dollar will depreciate.

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Definitions:

Safety

A state where there is a safeguard against potential harm, danger, or injury.

Goal-Setting Theory

Says that people will be motivated to the extent to which they accept specific, challenging goals and receive feedback that indicates their progress toward goal achievement.

Goal Difficulty

The extent to which a goal is challenging and requires effort to achieve; generally, more difficult goals can lead to higher performance if they are seen as attainable.

Performance Feedback

Information given to individuals or groups about their performance to facilitate improvement and learning.