Suppose That the Real Exchange Rate Between the United States

question 44

Multiple Choice

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Brazilian goods a basket of U.S.goods buys) ?

• A)an increase in the quantity of Brazilian currency that can be purchased with a dollar
• B)a decrease in the price of U.S.goods
• C)an increase in the price in Brazilian currency of Brazilian goods
• D)All of the above are correct.

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Definitions:

Tailoring

Adjusting financial strategies or models to address specific needs or circumstances of a business or investment.

Income Stream

A series of regular payments or revenues generated over time from investments, work, or business activities.

Dividend Preference Theory

A theory suggesting that investors prefer dividends from current earnings over potential capital gains because of the perceived certainty of dividend payments.

Bird in Hand

A theory in finance that suggests investors prefer the certainty of dividend payments to the potential for future capital gains.