31, Suppose the US. one-year interest rate is 3% per year, while a foreign count

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31, Suppose the US. one-year interest rate is 3% per year, while a foreign country has a one-year interest rate of 5% per year. Ignoring risk and transaction costs, a U.S. investor should invest in foreign bonds as long as the expected yearly rate of depreciation of the foreign currency is A) less than 5%. B) greater than 5%. C) greater than 2%. D) less than 2%. E) less than 1%. 32. Suppose you have one U.S. dollar with which you wish to purchase U.K. (one-year) bonds in period t. Which of the following expressions represents the amount of U.S. dollars you will receive in one year (i.e., period t +I) from purchasing U.K. bonds in period t? D)( +E/Et+ E) none of the above 33. Assume the interest parity condition holds and that individuals expect the dollar to appreciate by 5% during the coming year. Given this information, we know that A) the interest rate differential between the two countries is less than 5%. C)i-i* D) individuals will only hold foreign bonds. E) none of the above 34. Which of the following represents the demand for domestic goods? A)C+I+G B)C++G+X C)C+I+G EIM D)C+I+G+X+EIM E)C+I+G+X- IMe 35. Exports will decrease when there is A) an increase in the real exchange rate. B) an increase in domestic output. C) an increase in foreign output. D) all of the above E) none of the above 36. Which of the following is true when a county is experiencing a trade deficit (NX

Explanation / Answer

ans 31 option c is correct

ans 32 option d is correct

ans 33 option e is correct

ans 34 option e is correct

ans 35 option a is correct

ans 36 option c is correct

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