Author Question: If the interest rate on a bank deposit in the United States is 3 percent while a similar deposit ... (Read 150 times)

Yi-Chen · **on:** Jun 29, 2018

If the interest rate on a bank deposit in the United States is 3 percent while a similar deposit earns 6 percent in Britain, then we could expect that deposits would flow to

A) Britain if the pound is expected to depreciate more than 3 percent.
B) the United States regardless of exchange rate expectations.
C) the United States if the dollar is expected to appreciate less than 3 percent.
D) Britain if the pound is expected to depreciate less than 3 percent.
E) Britain regardless of exchange rate expectations.

Question 2

In the long run, the real interest rate is 3 percent, real GDP grows at 4 percent, velocity is constant, and the quantity of money grows at 8 percent. The nominal interest rate is

A) 7 percent. B) 12 percent. C) 10 percent. D) 8 percent. E) 6 percent.