Perfect asset substitutability is the assumption that A) the ...

[bucstennis@aim.com]

Perfect asset substitutability is the assumption that
 
  A) the foreign exchange market is in equilibrium only when expected returns on domestic assets are greater than returns on foreign currency bonds.
  B) the foreign exchange market is in equilibrium only when expected returns on foreign currency bonds are greater than returns on domestic assets.
  C) the foreign exchange market is in equilibrium only when expected returns on all assets are negative.
  D) the foreign exchange market is in equilibrium only when expected returns on domestic assets are equal to returns on foreign currency bonds.
  E) the foreign exchange market is in equilibrium only when domestic assets are risk-free.

Question 2

How is dollarization different from monetary union?
 
  What will be an ideal response?

[Danny Ewald]

Answer to Question 1

D

Answer to Question 2

The nations do not share a central bank and monetary policy.

[bucstennis@aim.com]

TYSM

[Sarahjh]

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