Asked by drishika gulati on Apr 25, 2024
Verified
Due to a boom in the US,the average rate of return on investments is likely to rise causing the demand for US dollar to
A) Increase
B) Decrease
C) Not change
D) None of the above
Average Rate of Return
A financial ratio that calculates the expected return on an investment relative to its initial cost.
US Dollar
The official currency of the United States, widely used as a benchmark and reserve currency worldwide.
Investments
Assets or items acquired with the goal of generating income or appreciation in value.
- Understand the rationale behind currency demand and the determinants of exchange rates.
- Analyze the repercussions of economic fluctuations, such as economic contractions and upswings, on the domestic currency's worth.
Verified Answer
AM
Alexa Manna5 days ago
Final Answer :
A
Explanation :
With an increase in the rate of return on investments, there will be a higher demand for US investments, which will lead to an increase in demand for the US dollar. This is because foreign investors will need to exchange their currency for US dollars in order to invest in the US. Therefore, the answer is A) Increase.
Learning Objectives
- Understand the rationale behind currency demand and the determinants of exchange rates.
- Analyze the repercussions of economic fluctuations, such as economic contractions and upswings, on the domestic currency's worth.