Suppose that the Australian interest rate is 5 per cent and the Japanese interest rate is 1 per cent. The effect of this difference in the foreign exchange market is that
A) investors expect the yen to appreciate against the dollar.
B) a Japanese investor is guaranteed to make an additional 4 per cent in yen terms by investing in Australia.
C) investors expect the yen to depreciate against the dollar.
D) all funds flow to Australia to get the higher interest rate.
Correct Answer:
Verified
Q55: Suppose the Reserve Bank wants to fix
Q57: The private sector surplus or deficit equals
A)investment
Q58: If interest rates in Japan rise and
Q59: The current account balance is equal to
A)net
Q61: The current account records all transactions below
Q62: The quantity of Australian dollars demanded by
Q63: When Australia imports goods and services from
Q64: Australians demand Japanese yen in order to
A)buy
Q65: In the foreign exchange market, which of
Q140: A change in which of the following
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents