Assume That Capital Is Perfectly Mobile and Substitutable and That

question 149

Multiple Choice

Assume that capital is perfectly mobile and substitutable and that the interest rate in the United States and the European Union is currently 5%. Investors expect the euro to rise against the dollar by 2% and they thus demand a _____ in the _____.

• A) higher return equal to 7%; United States
• B) higher return equal to 7%; European Union
• C) lower return equal to 3%; United States

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Definitions:

Requirements

Conditions or capacities needed by a system or product to solve a problem or achieve an objective.

Plaintiff

The party who initiates a lawsuit by filing a complaint with the court, alleging harm or wrongdoing by the defendant and seeking legal relief.

Superseding Cause

An intervening cause that alters the natural sequence of events and relieves the original party from liability in a legal context.

Unforeseeable

Situations or events that cannot be predicted or expected with any reasonable degree of certainty.