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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
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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