ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose that U.S. interest rates are 4 percent more than rates in the European Union. Would you expect the dollar to appreciate or depreciate against the euro, and by how much?
A. It would be expected that the dollar would appreciate by 4 percent.
B. It would be expected that the dollar would depreciate by less than 4 percent.
C. It would be expected that the dollar would depreciate by 4 percent.
D. It would be expected that the dollar would appreciate by less than 4 percent.
Suppose that U.S. interest rates are 4 percent more than rates in the European Union. If the forward and spot rates are the same, which direction would you expect financial capital to flow?
A. Capital would flow to the European Union, increasing the demand for foreign currency and decreasing the supply of foreign currency.
B. Capital would flow to the United States, increasing the demand for foreign currency and decreasing the supply of foreign currency.
C. Capital would flow to the United States, decreasing the demand for foreign currency and increasing the supply of foreign currency.
D. Capital would flow to the European Union, decreasing the demand for foreign currency and increasing the supply of foreign currency.
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Transcribed Image Text:Suppose that U.S. interest rates are 4 percent more than rates in the European Union. Would you expect the dollar to appreciate or depreciate against the euro, and by how much? A. It would be expected that the dollar would appreciate by 4 percent. B. It would be expected that the dollar would depreciate by less than 4 percent. C. It would be expected that the dollar would depreciate by 4 percent. D. It would be expected that the dollar would appreciate by less than 4 percent. Suppose that U.S. interest rates are 4 percent more than rates in the European Union. If the forward and spot rates are the same, which direction would you expect financial capital to flow? A. Capital would flow to the European Union, increasing the demand for foreign currency and decreasing the supply of foreign currency. B. Capital would flow to the United States, increasing the demand for foreign currency and decreasing the supply of foreign currency. C. Capital would flow to the United States, decreasing the demand for foreign currency and increasing the supply of foreign currency. D. Capital would flow to the European Union, decreasing the demand for foreign currency and increasing the supply of foreign currency.
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