Suppose That the U

question 419

Multiple Choice

Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that

• A) financial capital stops moving.
• B) a Japanese investor is guaranteed to make an additional 4 percent in yen terms by investing in the United States.
• C) investors expect the yen to appreciate against the dollar.
• D) investors expect the yen to depreciate against the dollar.

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Definitions:

Hot Spots

Plumes of hot mantle rising to the Earth's surface, often fixed beneath a tectonic plate, which create volcanic islands and seamounts as the plate moves overhead.

Rising Plume

A vertically ascending column of one fluid through another, typically used to describe hot, buoyant material rising through the Earth's mantle.

Crustal Expressions

Refers to the physical features present on the Earth's crust, which are a result of various geological processes.

Magma Chamber

A large underground pool of liquid rock found beneath the surface of the Earth.