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Suppose Investment Grew Increasingly Sensitive to Changes in the Domestic

Question 36

Multiple Choice

Suppose investment grew increasingly sensitive to changes in the domestic interest rate. In that case, you would expect to see


A) the exchange rate become more sensitive to changes in monetary policy.
B) the exchange rate become less sensitive to changes in monetary policy.
C) no change in the sensitivity of the exchange rate to changes in monetary policy.
D) foreign investment take up the slack and neutralize the structural changes in domestic investment behavior.
E) none of the above.

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