We Start with a 3 Percent Real Interest Rate in the United

question 33

Multiple Choice

We start with a 3 percent real interest rate in the United States and in Japan.Next,the real interest rate in Japan falls to 2 percent,and the U.S.real interest remains constant.As a result,

• A) the yen will depreciate and the dollar will appreciate.
• B) both the yen and the dollar will depreciate.
• C) the yen will appreciate and the dollar will depreciate.
• D) both the yen and the dollar will appreciate.

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Definitions:

Individual Retirement Account

A financial tool that provides tax advantages for retirement savings in the United States.

Exempt

Freed or relieved from a duty, requirement, or liability to which others are subject.

Security Interest

A legal claim or encumbrance on property or assets, securing the payment of a debt or performance of some other obligation.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay.