Question
Can someone please help me with the following? 35.) Suppose that the equilibrium interest rate in the U.S. market for loanable funds is 3% prior
Can someone please help me with the following?
35.) Suppose that the equilibrium interest rate in the U.S. market for loanable funds is 3% prior to any international capital flows in the United States. The equilibrium interest rate in the Japanese market for loanable funds is 7%. If lenders in both nations believe that loans to foreigners are just as good as loans to their own citizens, capital will flow from _____, making interest rates _____ in Japan and _____ in the United States.
- Japan to the United States; fall; rise
- the United States to Japan; rise; fall
- the United States to Japan; fall; rise
- Japan to the United States; rise; fall
36.) Suppose that the interest rate in the United States is 4%, in Japan it is 7%, and financial assets in the two countries are equal in risk. Assuming that loans in Japan and the United States carry equal risk, this implies that:
- the central bank of Japan has adopted a more expansionary monetary policy.
- the interest rate in Japan will increase further as compared to the U.S. interest rate.
- Japanese lenders will lend to U.S. borrowers.
- U.S. lenders will lend to borrowers in Japan.
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