If one dollar is initially equal in value to one euro and demand for euros increases, then each dollar will be worth
a. more than one euro, and European imports will be cheaper in the United States
b. less than one euro, and European imports will be more expensive in the United States
c. more than one euro, and European imports will be more expensive in the United States
d. less than one euro, and European imports will be cheaper in the United States
e. the same as the euro, and there will be no change in the values of imports or exports
B
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In which of the following situations would you hedge using a futures contract?
A. You are long in the cash market, the price is at a historical high, and you are certain that the price will decline. B. You are long in the cash market, the price is at a historical low, and you are certain that the price will increase. C. You are short in the cash market, the price is at a historical high, and you are certain that the price will decrease. D. You are short in the cash market, the price is at a historical low, and you are certain that the price will decrease further.
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What will be an ideal response?