Assume That the U

question 11

Multiple Choice

Assume that the U.S. interest rate is 11% while the interest rate on the euro is 7%. If euros are borrowed by a U.S. firm, they would have to ____ against the dollar by ____ in order to have the same effective financing rate from borrowing dollars.

• A)depreciate; about 3.74%
• B)appreciate; about 3.74%
• C)appreciate; about 4.53%
• D)depreciate; about 4.53%

---

Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount they actually pay.

Marginal Cost

The expenditure required to create one more unit of a product.

Producer Surplus

The difference between the amount that producers are willing and able to sell a product for and the actual amount they do sell it for.