If the U.S. interest rate is 5% and the interest rate in Germany is 2%, and the euro is expected to appreciate by 2% over the next year, then investors would:
a. sell dollars in the spot market.
b. buy euros.
c. seek to invest in the United States.
d. seek to invest in Germany.
Answer: c. seek to invest in the United States.
Economics
You might also like to view...
In the long-run ISLM model and with everything else held constant, the long-run effect of an expansionary fiscal policy is to ________ real output and ________ the interest rate
A) increase; increase B) not change; not change C) increase; not change D) not change; increase
Economics
The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
Economics