Evaluate each of the following statements ( True or False ) Jason is a U S investor who is considering investing in euro denominated securities If the U S dollar is expected to strengthen against the euro over his investment horizon, this expectation, holding all else equal, will encourage Jason to invest more because a smaller amount of dollars is required for him to invest Answer True False If the U S interest rate is high, this will encourage U S firms to invest in foreign operations, holding all else equal Answer True False A floating exchange rate can reverse a current account deficit because the deficit implies a greater demand for the foreign currency, placing a downward pressure on the home currency The depreciation of the home currency will then increase the demand for foreign goods Answer True False U S investors benefit from investing in foreign securities because the returns on international investments are in general safer Answer True False A floating exchange rate system has the potential to self correct (reverse) a trade deficit However, the floating system may not always achieve this adjustment, because the demand for international trade transactions is adjusted slowly Answer True False

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Posted on Oct 03, 2024

Evaluate each of the following statements (True or False?).

Jason is a U.S. investor who is considering investing in euro-denominated securities. If the U.S. dollar is expected to strengthen against the euro over his investment horizon, this expectation, holding all else equal, will encourage Jason to invest more because a smaller amount of dollars is required for him to invest.

Answer: True | False

If the U.S. interest rate is high, this will encourage U.S. firms to invest in foreign operations, holding all else equal.

Answer: True | False

A floating exchange rate can reverse a current account deficit because the deficit implies a greater demand for the foreign currency, placing a downward pressure on the home currency. The depreciation of the home currency will then increase the demand for foreign goods.

Answer: True | False

U.S. investors benefit from investing in foreign securities because the returns on international investments are in general safer.

Answer: True | False

A floating exchange rate system has the potential to self-correct (reverse) a trade deficit. However, the floating system may not always achieve this adjustment, because the demand for international trade transactions is adjusted slowly.

Answer: True | False