Assume that we are at the natural rate of GDP, meaning we do not have a recession or an expansion, and then the Central Bank raises interest rates, how can this create a recession A our business investments will increase and our exports will decrease B our business investments will decrease and our exports will increase C) our business investments will decrease and our exports will decrease D our business investments will increase and our imports will increase Question 22 Assume that you, as an American, want to buy UK bonds because the UK bonds have a higher interest rate. What do you need to also consider before you buy UK bonds. An example would be, suppose that USA bonds pay 3% and UK bonds pay 7%, then what do you need to consider before buying UK bonds A the British pound will not appreciate by more than 4% (B) that the American dollar will not appreciate by more than 4% that the American dollar will not depreciate by more than 4% the nominal exchange rate will remain stable
Assume that we are at the natural rate of GDP, meaning we do not have a recession or an expansion, and then the Central Bank raises interest rates, how can this create a recession A our business investments will increase and our exports will decrease B our business investments will decrease and our exports will increase C) our business investments will decrease and our exports will decrease D our business investments will increase and our imports will increase Question 22 Assume that you, as an American, want to buy UK bonds because the UK bonds have a higher interest rate. What do you need to also consider before you buy UK bonds. An example would be, suppose that USA bonds pay 3% and UK bonds pay 7%, then what do you need to consider before buying UK bonds A the British pound will not appreciate by more than 4% (B) that the American dollar will not appreciate by more than 4% that the American dollar will not depreciate by more than 4% the nominal exchange rate will remain stable
Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates
Section: Chapter Questions
Problem 16QA
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Question
H4.
Transcribed Image Text:Assume that we are at the natural rate of GDP, meaning we do not have a recession or an expansion, and then the Central Bank
raises interest rates, how can this create a recession
A our business investments will increase and our exports will decrease
B our business investments will decrease and our exports will increase
с our business investments will decrease and our exports will decrease
D
our business investments will increase and our imports will increase
Question 22
Assume that you, as an American, want to buy UK bonds because the UK bonds have a higher interest rate. What do you need to
also consider before you buy UK bonds. An example would be, suppose that USA bonds pay 3% and UK bonds pay 7%, then what
do you need to consider before buying UK bonds
A the British pound will not appreciate by more than 4 %
B) that the American dollar will not appreciate by more than 4%
C) that the American dollar will not depreciate by more than 4%
the nominal exchange rate will remain stable
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