Suppose That a U

question 35

Multiple Choice

Suppose that a U.S.dollar can earn interest of 1 percent a year in Chicago and a Canadian dollar can earn interest of 3 percent a year in Winnipeg.Will money flow from Chicago to Winnipeg?

• A)No, if investors expect the U.S.dollar to appreciate by at least 2 percent per year.
• B)No, as long as the U.S.dollar maintains higher purchasing power than the Canadian dollar.
• C)Yes, because the returns on money are higher in Winnipeg.
• D)No, because the outflow of U.S.funds would create a decrease in the U.S.dollar value, penalizing investors when they attempted to recover their funds.
• E)No, if investors expect that the Canadian dollar will appreciate by at least 2 percent per year.

---

Definitions:

Perspective-taking Ability

The capacity to understand and consider another individual's viewpoint.

Concession Rate

A measure of the frequency or extent to which concessions are made in a negotiation or bargaining scenario.

Creative Solutions

Innovative and unconventional strategies or answers devised to solve problems or resolve disputes.

Laboratory Simulations

Experimental setups designed to mimic real-world processes in a controlled environment for research and study.