to know whether the dollar is overvalued, we need to know\na. what foreign currency the dollar is being…

to know whether the dollar is overvalued, we need to know\na. what foreign currency the dollar is being compared with.\nb. whether federal reserve monetary policy is expansionary or contractionary.\nc. the real interest rate in the united states and the real interest rate in whatever countrys currency the dollar is being compared with.\nd. the equilibrium exchange rate between the dollar and the foreign currency the dollar is being compared with.

to know whether the dollar is overvalued, we need to know\na. what foreign currency the dollar is being compared with.\nb. whether federal reserve monetary policy is expansionary or contractionary.\nc. the real interest rate in the united states and the real interest rate in whatever countrys currency the dollar is being compared with.\nd. the equilibrium exchange rate between the dollar and the foreign currency the dollar is being compared with.

Answer

Brief Explanations:

To determine if a currency (the dollar here) is over - valued, we need to know the equilibrium exchange rate between it and the foreign currency it is being compared with. The equilibrium exchange rate represents the 'fair - value' exchange rate. If the actual exchange rate is higher than the equilibrium rate, the currency is overvalued. Knowing just the currency it is compared with (a) is not enough. Federal Reserve monetary policy (b) affects exchange rates but doesn't directly tell us if the dollar is overvalued. Real interest rates (c) influence exchange rates but don't solely determine overvaluation.

Answer:

D. the equilibrium exchange rate between the dollar and the foreign currency the dollar is being compared with.