Which Example of Market Expectations Causes the Dollar to Appreciate

question 87

Multiple Choice

Which example of market expectations causes the dollar to appreciate against the yen--expectations that the U.S.economy will have:

• A) Faster economic growth than Japan
• B) Higher future interest rates than Japan
• C) More rapid money supply growth than Japan
• D) Higher inflation rates than Japan

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Definitions:

Open-Market Operations

Activities undertaken by central banks to buy or sell government securities in the open market to influence the money supply and interest rates.

Aggregate Demand

The all-embracing pursuit of goods and services in an economy, calculated at a fixed overall price level and within a chosen time frame.

Business Cycle Trough

The phase in the business cycle where economic activity is at its lowest point, preceding a recovery or expansion period.

Purchasing Power

The financial ability to buy goods and services; it reflects the value of money in terms of the quantity of goods or services that one unit of money can buy.