If a Nation's Interest Rates Are Relatively Low Compared to Those

question 70

Multiple Choice

If a nation's interest rates are relatively low compared to those of other countries, then the exchange value of its currency will tend to

• A) depreciate under a system of floating exchange rates.
• B) depreciate under a system of fixed exchange rates.
• C) appreciate under a system of fixed exchange rates.
• D) appreciate under a system of floating exchange rates.

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Definitions:

Rational Expectations Theorists

Economists who postulate that individuals make decisions based on their rational outlook, available information, and past experiences.

New Classical Economists

Economists who believe in the theory that markets are always clear and that participants have rational expectations, focusing on the supply side for economic growth.

Government Intervention

Actions taken by a government to affect the economy, which can include regulations, subsidies, and taxes.

Supply-Siders

are economists who believe that changes in marginal tax rates and the ability to supply goods in the economy significantly influence economic growth.