If a Nation's Interest Rate on Foreign Currency Deposits Is

question 86

Multiple Choice

If a nation's interest rate on foreign currency deposits is higher inside than outside the nation, which of the following is the cause?

• A) a fall in the domestic money supply
• B) a country premium, meaning investors are concerned about defaults or capital controls
• C) a currency premium
• D) an exchange rate premium

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Definitions:

Autokinetic Effect

A visual illusion where a small, stationary point of light in a dark environment appears to move because of involuntary eye movements.

Informational Influence

A social influence that leads individuals to accept information from others as evidence about reality, often leading to internalization or private acceptance.

Low-Ball Technique

Influence technique based on commitment, in which one first gets a person to comply with a seemingly low-cost request and only later reveals hidden additional costs.

Door-In-The-Face Technique

Influence technique based on reciprocity, in which one starts with an inflated request and then retreats to a smaller request that appears to be a concession.