If real interest rates in the United States fell, with the dollar initially trading for 9 French francs, which of the following scenarios might be observed?
A) The value of the dollar might climb to 9.5 francs before falling back to 9.25 francs.
B) The value of the dollar might fall immediately to 8.5 francs and then continue downward more slowly to a new equilibrium of 8.25 francs.
C) The value of the dollar might fall to 8.5 francs before recovering partially to 8.82 francs.
D) The value of the dollar might hold in the neighborhood of 9 francs while domestic prices adjusted over the long term.
E) None of the above.

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The Answer of If real interest rates in the United States fell, with the dollar initially trading for 9 French francs, which of the following scenarios might be observed?
A) The value of the dollar might climb to 9.5 francs before falling back to 9.25 francs.
B) The value of the dollar might fall immediately to 8.5 francs and then continue downward more slowly to a new equilibrium of 8.25 francs.
C) The value of the dollar might fall to 8.5 francs before recovering partially to 8.82 francs.
D) The value of the dollar might hold in the neighborhood of 9 francs while domestic prices adjusted over the long term.
E) None of the above.

If Real Interest Rates in the United States Fell, with the Dollar