Author Question: Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The ... (Read 118 times)

ericka1 · **on:** Jun 29, 2018

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

A) financial capital stops moving.
B) a Japanese investor is guaranteed to make an additional 4 percent in yen terms by investing in the United States.
C) investors expect the yen to appreciate against the dollar.
D) investors expect the yen to depreciate against the dollar.

Question 2

The monetary base is

A) currency and reserves of depository institutions.
B) currency minus depository institutions' reserves.
C) depository institutions' reserves minus Federal Reserve notes.
D) the money borrowed by banks from other banks.