If Asset Owners in Japan and the United States Consider

Multiple Choice

If asset owners in Japan and the United States consider Japanese and U.S. assets as good substitutes for each other and if the U.S. interest rate is 5% while the Japanese interest rate is 2%:

A) financial inflows will reduce the U.S. interest rate.
B) financial outflows will reduce the Japanese interest rate.
C) the interest rate gap between the United States and Japan will grow.
D) financial inflows will increase the U.S. interest rate.