Assume a System of Floating Exchange Rates

question 42

Multiple Choice

Assume a system of floating exchange rates.In response to relatively high domestic interest rates,suppose that foreign investors place their funds in domestic capital markets.The result would be

• A) a depreciation of the domestic currency and a rise in net exports
• B) a depreciation of the domestic currency and a fall in net exports
• C) an appreciation of the domestic currency and a rise in net exports
• D) an appreciation of the domestic currency and a fall in net exports

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Definitions:

Compound Leverage Factor

A measure used in finance to quantify the effects of leveraging, or the use of borrowed funds, on the compound rate of return for an investment, highlighting both the potential gains and risks.

Channel Stuffing

This is a deceptive business practice used by a company to inflate its sales figures by forcibly pushing more products into the distribution channel than it can sell to the end customers.

Quarterly Sales

A financial reporting metric that indicates the total sales revenue generated by a company in a quarter.

Artificial Sales

Sales transactions that may not represent genuine demand in the market, often orchestrated to manipulate market conditions or financial statements.