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:

Factory Work

Employment in manufacturing settings, typically characterized by assembly-line production and specialization of tasks.

Productivity

A measure of the efficiency of production, often quantified as the ratio of outputs produced to inputs used in the production process.

Hour Worked

A measure of the amount of time spent performing tasks or duties for an employer during a specified period.

Goods

Tangible products or commodities that can be bought, sold, or traded and are typically used to satisfy wants or needs.