The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is the ________ on these assets relative to one another.

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The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is the expected return on these assets relative to one another. Investors will choose assets that offer the highest expected return for a given level of risk, taking into account any transaction costs or liquidity considerations. While interest rates, risk, and liquidity may also be important factors, expected return is considered the primary driver of asset demand.

The Theory of Asset Demand Suggests That the Most Important