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Author Question: Everything else remaining the same, in the foreign exchange market, which of the following increases ... (Read 41 times)

genevieve1028

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on: Jun 29, 2018
Everything else remaining the same, in the foreign exchange market, which of the following increases the supply of U.S. dollars?
 
  A) The U.S. interest rate rises.
  B) The U.S. interest rate differential increases.
  C) The expected future exchange rate rises.
  D) The European interest rate rises.
  E) The exchange rate falls.

Question 2

If the inflation rate is 3 percent and the real interest rate is 3 percent, then what is the nominal interest rate?
 
  What will be an ideal response?


thall411

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Reply #1 on: Jun 29, 2018
Answer to Question 1

D

Answer to Question 2

The nominal interest rate equals the real interest rate plus the inflation rate, or
(3 percent) + (3 percent) = 6 percent.


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