As the relative expected return on dollar deposits increases,foreigners will want to hold more ________ deposits and less ________ deposits.

Question

Quizplus · Accepted Answer

As the expected return on dollar deposits increases, foreigners will want to hold more dollar deposits (in order to earn higher returns) and less foreign deposits. Therefore, choice C (dollar deposits versus foreign deposits) is the best option. Choices A and B are incorrect because they do not make sense in the context of the question, and choice D is incorrect because it does not differentiate between holding foreign or dollar deposits.

As the Relative Expected Return on Dollar Deposits Increases,foreigners Will