Could the falling dollar get out of hand? If the dollar falls too far, investors might lose confidence in U.S. investmentsespecially the government bond market. The money to finance the federal budget and trade deficits could migrate elsewhere. Inflation could flare up, too, since Japanese and German manufacturers will eventually pass along price hikesand U.S. companies might follow suit to increase their profit margins. The U.S. federal Reserve then might need to step in and stabilize the dollar by raising interest rates. And higher interest rates could cause the U.S. economy to slow down and end the Wall Street Rally.
Worried about these side effects, Federal Reserve chairman Paul Volcher has said the dollar has fallen far enough. What is the equilibrium level? Probably near where it is or slightly lower. It all depends on when the U.S. trade deficit turns around or if investors defect from U.S. Treasury Bonds. It requires a good deal of political patience on the part of the U.S. Congress, says Dr. Cline, And there must be an expectation of patience on the part of private investors. The chance are relatively good that we will avoid an investor break or panic.
1、What is the main idea of this passage?
[A]. The impression of the falling U.S. dollar.
[B]. The result of the U.S. falling dollar.
[C]. The side effect of U.S. falling dollar.
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