Asked by Cameron Gonzales on Sep 24, 2024
Verified
Due to a recession in the US,the average rate of return on investments is likely to fall causing the US dollar to
A) Appreciate
B) Depreciate
C) Not change in value
D) None of the above
Rate of Return
Rate of Return is a measure of the profitability of an investment, calculated as the percentage of the total amount returned in relation to the original investment made.
US Dollar
The official currency of the United States, widely used as a standard unit of currency in international finance and trade.
Recession
A significant decline in economic activity spread across the economy, lasting more than a few months.
- Apprehend the components that influence the need for currency and the dynamics of exchange rates.
- Evaluate the effects of economic conditions such as recessions and booms on domestic currency.
Verified Answer
NR
Narender Reddy Dinneabout 7 hours ago
Final Answer :
B
Explanation :
A recession in the US usually leads to a decrease in interest rates by the Federal Reserve to stimulate the economy. Lower interest rates mean that the average rate of return on investments is likely to fall, which makes the US dollar less attractive to foreign investors. As a result, the demand for the US dollar decreases, and its value falls, leading to depreciation.
Learning Objectives
- Apprehend the components that influence the need for currency and the dynamics of exchange rates.
- Evaluate the effects of economic conditions such as recessions and booms on domestic currency.