If asset owners in Japan and the United States consider Japanese and U.S. assets as good substitutes for each other and if the U.S. interest rate is 5% and the Japanese interest rate is 2%, what will NOT occur?

Question

Quizplus · Accepted Answer

Given the interest rate differential, investors would seek higher returns, thus moving funds from Japan to the U.S., not from the U.S. to Japan. This is because investors generally move their funds to where they can earn higher interest rates.

If Asset Owners in Japan and the United States Consider