If interest rates fell more in the US than in France, then other things the same

ID: 1211412 • Letter: I

Question

A. US Citizens would buy fewer French bonds and French citizens would buy more US Bonds

B. US Citizens would buy more French bonds and French citizens would buy fewer US Bonds

C. US Citizens would buy fewer French bonds and French citizens would fewer more US Bonds

D. US Citizens would buy more French bonds and French citizens would buy more US Bonds

Purchase Price Parity always hold because the quality of a good in one country is the same in another.

True

False

If a paper costs 2 yen in China and $6 in Texas and PPP holds, what is the exchange rate?

A. 1/3 yen per dollar

B. 4 yen per dollar

C. 1/4 yen per dollar

D. 3 yen per dollar

If interest rate are low in US then US as well as French citizens would buy French bonds so as to earn more interest.

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