Author Question: In a country with floating exchange rates and high capital mobility, an increase in government ... (Read 65 times)

crazycityslicker · **on:** Jun 30, 2018

In a country with floating exchange rates and high capital mobility, an increase in government spending will be

A) less effective than with low capital mobility.
B) highly effective.
C) not effective at all.
D) harmful to the growth of real incomes.

Question 2

Suppose an individual firm is comparing two investments, a one year bond from a U.S. firm paying 4 or a one year bond from a German firm which is paying 6. The current dollars-per-euro rate is 0.75, and the expected rate in one year is 0.72.

If the expected rate is correct, which investment will receive the higher return? A) The U.S. Bond
B) The German Bond
C) They will have the same return.
D) This cannot be determined from the information given.