According to the portfolio balance approach,a reduction in the risk premium on the foreign bond leads domestic residents to increase the demand for the:
A)domestic money
B)domestic bond
C)foreign bond
D)all of the above

Question

Quizplus · Accepted Answer

The portfolio balance approach suggests that if the risk premium on foreign bonds decreases, making them relatively more attractive, domestic residents will increase their demand for foreign bonds as they seek to optimize their portfolio's risk-return profile.

According to the Portfolio Balance Approach,a Reduction in the Risk