According to this Application, during the late 1980s, Argentina pegged its currency to the U.S. dollar. After 1995, the U.S. dollar appreciated sharply on world markets. Since the Argentinean peso was pegged to the U.S.
dollar, the appreciation of the dollar essentially caused
A) the peso to appreciate relative to the dollar, but depreciate on world markets.
B) a sharp devaluation of the dollar relative to the peso.
C) a severe revaluation of the peso relative to the dollar.
D) the peso to also appreciate sharply on world markets.
Question 2
The quantity of loanable funds demanded increases if the real interest rate falls, all other things remaining the same, because the real interest rate
A) is the opportunity cost of investment.
B) is not related to the price of bonds and stocks.
C) affects the supply of saving which, in turn, determines the quantity of investment.
D) affects the quantity of saving supplied.
E) determines the cost of living.
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