Other Things the Same,if the Real Interest Rate in a Country

question 23

Multiple Choice

Other things the same,if the real interest rate in a country falls,domestic residents will desire to purchase

• A)more capital goods and more foreign bonds.
• B)more capital goods but fewer foreign bonds.
• C)more foreign bonds but fewer capital goods.
• D)fewer capital goods and fewer foreign bonds.

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Definitions:

Yen

The official currency of Japan, symbolized as ¥, and one of the most traded currencies in the foreign exchange market.

Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business, vital for assessing the financial health of an entity.

NAFTA

The North American Free Trade Agreement, which was a treaty between the United States, Canada, and Mexico aimed at eliminating trade barriers between the countries.

Absolute PPP

Absolute Purchasing Power Parity, an economic theory suggesting that goods in different countries should have the same price when expressed in a common currency.