Ignoring Risk Differences, If We Observe American Investors Purchasing Foreign

question 40

Multiple Choice

Ignoring risk differences, if we observe American investors purchasing foreign bonds when the U.S. interest rate is above the foreign interest rate, we could assume that:

• A) American investors lack good information.
• B) these investors expect the dollar to appreciate over the life of their investment.
• C) these investors expect the dollar to depreciate over the life of their investment.
• D) these investors expect that U.S. inflation will slow.

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Definitions:

Fearful Consequences

Negative outcomes that are dreaded or feared, often used as a deterrent for certain behaviors.

Attribution Theory

A concept in social psychology that explains how individuals infer the causes of their own and others' behavior and events.

Fundamental Attribution Error

The tendency to attribute others' behaviors to their character or personality while underestimating situational factors.

Milgram's Study

A series of social psychology experiments conducted by Stanley Milgram, which measured the willingness of participants to obey an authority figure who instructed them to perform acts conflicting with their personal conscience.