Assume That the Interest Parity Condition Holds and That the Australian

question 23

Multiple Choice

Assume that the interest parity condition holds and that the Australian dollar is expected to appreciate against the pound. Given this information, we know that:

• A) the Australian interest rate exceeds the U.K. interest rate.
• B) individuals will prefer to hold the U.K. bonds because the U.K. interest rate exceeds the Australian interest rate.
• C) individuals will prefer to hold Australian bonds because the Australian interest rate exceeds the U.K. interest rate.
• D) the Australian and European interest rates are equal.
• E) the U.K. interest rate exceeds the Australian interest rate.

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Definitions:

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed.

Primary Drives

Those drives that involve needs of the body such as hunger and thirst.

Psychoanalytic Theory

A theory of psychology and human behavior emphasizing unconscious motives and conflicts, originally developed by Sigmund Freud.

Behavior Theory

A theory that suggests that behaviors are learned and maintained through interactions with the environment, including stimuli and reinforcements.