According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase:
A) the demand for domestic money
B) the demand for the domestic bond
C) the demand for the foreign bond
D) the risk premium

Question

According to the portfolio balance approach,an increase in the expected appreciation of the foreign currency leads domestic residents to increase: 
A) the demand for domestic money
B) the demand for the domestic bond
C) the demand for the foreign bond
D) the risk premium

Quizplus · Accepted Answer

An increase in the expected appreciation of the foreign currency makes foreign assets more attractive, leading domestic residents to increase their demand for foreign bonds.

According to the Portfolio Balance Approach,an Increase in the Expected