If the Interest Rate on a Bank Deposit in the United

question 9

Multiple Choice

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

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Definitions:

Liters

A metric unit of volume equal to one cubic decimeter, commonly used to measure liquids and gases.

Atm

Atmospheric pressure, a unit of measurement representing the pressure exerted by the Earth's atmosphere at sea level.

Container

Any item that can hold materials, products, or substances, preventing their escape or entry of others.

Compressed

Reduced in volume as a result of applied pressure.