If the Interest Rate on a Bank Deposit in the United

question 159

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

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