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Question
People in the Bahamas use both Bahamian dollars and U.S. dollars to pay for goods and services. Suppose that the Fed increases money supply, causing higher inflation rate in the U.S. If the exchange rate were allowed to float, the U.S. dollar will ________ against the Bahamian dollar and Bahamians will substitute toward more __________ holding.
a. appreciate; Bahamian dollars
b. appreciate; U.S. dollars
c. depreciate; Bahamian dollars
d. depreciate; U.S. dollars
Answer
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Related questions
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a. The sensitivity of the domestic currency value of future operating income to unexpected changes in exchange rate.
b. The risk of operating in politically risky countries.
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Q:
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Q:
Inflation from one country can be transmitted to another if a floating exchange rate is being used.
Q:
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a. 10% increase in money supply.
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Q:
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Q:
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c. International credit
d. Domestic reserves