1) The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is

A) the level of trade and capital flows.

B) the expected return on these assets relative to one another.

C) the liquidity of these assets relative to one another.

D) the riskiness of these assets relative to one another.

2) The ________ suggests that the most important factor affecting the demand for domestic and foreign assets is the  expected return on domestic assets relative to foreign assets.

A) theory of asset demand

B) law of one price

C) interest parity condition

D) theory of foreign capital mobility

3) The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is the ________ on these assets relative to one another.

A) interest rate

B) risk

C) expected return

D) liquidity