If the Deutsche Mark and the British pound exchange rates are fixed, and the German Bundesbank conducts a tight monetary policy to counteract an expansion in German GDP, interest rates in Germany will ____, which will force Britain to ______.
A) fall; default
B) rise; raise its rates to maintain interest parity and the fixed exchange rate
C) fall; sell gold
D) rise; lower its rates to maintain interest parity and the fixed exchange rate
Ans: B) rise; raise its rates to maintain interest parity and the fixed exchange rate
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The present discounted value of a future payment becomes smaller when
A) the nominal interest rate decreases. B) the payment is made sooner rather than later. C) the payment itself decreases. D) all of the above E) none of the above
What can be concluded about the U.S. balance of trade dating back to 1965?
a. During most years, the United States experienced a trade surplus on goods and services.
b. During most years, the value of goods and services imported exceeded the value of goods and services exported.
c. During most years, the United States experienced a positive value for the balance on goods and services.
d. During most years, the value of goods and services exported exceeded the value of goods and services imported.