If the Dollar Interest Rate Is 10 Percent, the Euro

question 61

Multiple Choice

If the dollar interest rate is 10 percent, the euro interest rate is 12 percent, then

• A) an investor should invest only in dollars if the expected dollar depreciation against the euro is negative 4 percent.
• B) an investor should invest only in euros an investor should invest only in dollars if the expected dollar depreciation against the euro is negative 4 percent.
• C) an investor should be indifferent between dollars and euros an investor should invest only in dollars if the expected dollar depreciation against the euro is negative 4 percent.
• D) an investor should invest only in dollars.
• E) an investor should invest only in euros.

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Definitions:

Total Output

Total output is the complete quantity of goods or services produced by an economy, firm, or production process within a specific period.

Marginal Cost

The additional cost incurred by producing one more unit of a product.

Average Variable Cost

The per unit cost of production excluding fixed costs, calculated by dividing the total variable costs by the quantity of output produced.

Short-Run Production

The period in which at least one input or factor of production is fixed, allowing firms to adjust only certain inputs to change output levels.