Assume Identical Interest Rates on Comparable Securities in the United

question 74

Multiple Choice

Assume identical interest rates on comparable securities in the United States and foreign countries.Suppose investors anticipate that in the future the U.S.dollar will depreciate against foreign currencies.Investment funds would tend to:

• A) Flow from the United States to foreign countries
• B) Flow from foreign countries to the United States
• C) Remain totally in foreign countries
• D) Remain totally in the United States

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Definitions:

Price-taker Industry

A Price-taker Industry is one in which individual firms have no control over the price of their product and must accept the market price as determined by supply and demand.

Constant Cost Industry

An industry wherein the costs of production do not change as the overall level of output increases or decreases.

Entry Barriers

Obstacles that prevent new competitors from easily entering an industry or area of business, including high startup costs, licensing requirements, and access to technology.

Zero Economic Profit

A situation where a firm's total revenue is exactly equal to its total opportunity costs, indicating no excess returns over the cost of capital.