If the Interest Rate in Japan Is Greater Than the Interest

question 149

Multiple Choice

If the interest rate in Japan is greater than the interest rate in Canada, rate of return parity suggests that

• A) the inflation rate is lower in Japan than in Canada.
• B) Canadian financial assets are poor investments.
• C) the yen is expected to depreciate against the Canadian dollar.
• D) the yen is expected to appreciate against the Canadian dollar.
• E) Japanese financial assets are poor investments.

---

Definitions:

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate reflection of an economy's size and how it's growing over time.

Price Level

An index or measure that represents the average prices of goods and services in an economy at a given time.

Human Capital

The knowledge and skills that workers acquire through education and on-the-job training

Technology

The application of scientific knowledge for practical purposes, especially in industry and in the creation of goods and services.