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If the Interest Rate on a Bank Deposit in Australia

Question 71

Multiple Choice

If the interest rate on a bank deposit in Australia is 3 per cent while a similar deposit earns 6 per cent in Britain, then we could expect that deposits would flow to


A) Britain regardless of exchange rate expectations.
B) Britain if the pound is expected to depreciate more than 3 per cent.
C) Britain if the pound is expected to depreciate less than 3 per cent.
D) Australia regardless of exchange rate expectations.
E) Australia if the Australian dollar is expected to appreciate less than 3 per cent.

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