When the Exchange Rate Depreciates in the Short Run and Then

question 52

Multiple Choice

When the exchange rate depreciates in the short run and then appreciates to its original level in the long run, it implies that the foreign money supply has:

• A) temporarily risen.
• B) permanently risen.
• C) temporarily fallen.
• D) permanently fallen.

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Definitions:

Bonds

Fixed-income investments where an investor loans money to an entity (corporate or governmental) which borrows the funds for a defined period of time at a fixed interest rate.

Stocks

Shares of ownership in a company, representing a claim on the company's assets and profits.

Financial Assets

Assets that derive value because of a contractual claim, such as stocks, bonds, and bank deposits.

Earn Revenue

The process by which businesses generate income through the sale of goods, provision of services, or other primary business activities.