If the dollar interest rate is 5 percent and the euro interest rate is 3 percent, then an investor should O be indifferent between dollars and euros. invest only in euros if the exchange rate is expected to remain constant. O invest only in euros. O invest only in dollars if the exchange rate is expected to remain constant. O invest only in dollars.

If the dollar interest rate is 5 percent and the euro interest rate is 3 percent, then an investor should O be indifferent between dollars and euros. invest only in euros if the exchange rate is expected to remain constant. O invest only in euros. O invest only in dollars if the exchange rate is expected to remain constant. O invest only in dollars.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Draw a demand for dollars curve. Label it D. Draw a supply of dollars curve . Label it S. Draw a point at the equilibrium quantity and exchange rate. Draw an arrow between the D and S curves that indicates a price at which there is a shortage of dollars. Label it When there is a shortage of dollars in the foreign exchange market, ------------. A. The demand for Japanese yen will increase so the foreign exchange market can move into equilibrium B. The supply of Japanese yen will increase so the foreign exchange market can move into equilibrium C. The forces of supply and demand pull the foreign exchange market into equilibrium D. Prices in the United States will fall relative to prices in Japan.
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If the exchange rate between the U.S. dollar and the Japanese yen were such that one U.S. dollar equals 100 yen, what would be the price in dollars of a Japanese automobile that cost 2,000,000 yen? A. $100 B. $20,000 C. $120,000 D. $2,000,000
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As the value of the American dollar increases relative to the Mexican peso, we expect that international demand for American corn output relative to Mexican corn may а. increase decrease b. stay the same as international corn demand is independent of the exchange rates С. we cannot tell Od.
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