Questions
ECON 201 Sections 2 & 3, Winter 2025 Unit 15 practice questions
Single choice
The French interest rate is lower than the international market rate, and the Italian interest rate is higher than the international interest rate. Capital will flow from ______________ to _______________ if it can cross international boundaries.
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Step-by-Step Analysis
To analyze capital flows across borders, we consider where investors can earn a higher return from placing capital. If a country’s interest rate is lower than the international benchmark, funds typically move away from that country in search of higher yields elsewhere. Conve......Login to view full explanationLog in for full answers
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Similar Questions
Suppose that the equilibrium interest rate in the U.S. market for loanable funds is 4% prior to any international capital flows in the United States. The equilibrium interest rate in the Chinese market for loanable funds is 8%. 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 China and _____ in the United States.
Suppose that the interest rate is 4% in the United States and 7% in Japan. Assuming financial assets in the two countries carry equal risk:
Which of the following is not a determinant of capital flows?
If the real interest rate in country A is higher than the real interest rate in country B, capital will flow into country _______________, causing the real interest rate in country A to ________________.
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