Use the Following Table to Answer the Next Two Questions

question 130

Multiple Choice

Use the following table to answer the next two questions
European Expected value of the dollar in 3 months
Investor (dollars per euro)
Investor #1 $1.30
Investor #2 $1.20
Investor #3 $1.15
-If the current exchange value of the dollar is $1.25 per euro

• A) European Investor #1 has less incentive to invest in the United States,and thus demands fewer dollars
• B) European Investor #2 has less incentive to invest in the United States,and thus demands fewer dollars
• C) European Investor #3 has less incentive to invest in the United States,and thus demands fewer dollars
• D) all three European investors have less incentive to invest in the United States,and thus demands fewer dollars

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Definitions:

Self-Interest

A principle that assumes individuals make decisions that they perceive to be in their own best advantage, often equated with rational behavior.

Investment

The allocation of resources, such as capital or time, in expectation of future returns, typically in the form of profit, interest, or appreciation in value.

Stocks and Bonds

Financial instruments representing ownership in a company (stocks) and debt obligations issued by entities (bonds), respectively, used for investment purposes.

Private Enterprise

Private enterprise is a business or industry that is managed and owned by private individuals or companies rather than by the state.