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Holding All Else Constant, a Decrease in the Real Interest

Question 32

Multiple Choice

Holding all else constant, a decrease in the real interest rate on U.S. assets will ________ the demand for dollars in the foreign exchange market and ________ the equilibrium Mexican peso/U.S. dollar exchange rate.


A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

Correct Answer:

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