A Decrease in the Foreign Real Interest Rate Will Tend

question 7

Multiple Choice

A decrease in the foreign real interest rate will tend to cause,other things the same ________.

• A)a decrease in the return on dollar assets relative to foreign assets
• B)an increase in the demand for dollars
• C)a depreciation of the domestic currency
• D)individuals to hold fewer dollar assets

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Definitions:

Equilibrium Quantity

The amount of products or services that are available and sought after at the market's balance price.

Interest Rate

The percent of principal charged by the lender for the use of its money or the rate earned on deposits.

Loanable Funds

The funds available for borrowing in the financial markets, derived from the savings of individuals and institutions.

Price Floor

A price floor set by a government or an organization, establishing the minimum price that can be charged for a good, service, or resource.