Suppose the interest parity condition holds. Also assume that the one-year interest rate in the United States is 5% and that the one-year interest rate in Canada is 6%. What does this imply about the current versus future expected exchange rate (for the U.S. and Canadian dollars)? Explain
What will be an ideal response?
If the interest rate in US is less than the interest rate in Canada, we know that Canadian dollars must be expected to depreciate to equate the expected returns on the two bonds.
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Which of the following is a problem with the Coase Theorem?
A. Transaction costs are high in many situations B. Government intervention is a better solution for most externalities C. Property rights are rarely defined clear enough D. Externalities can be fixed with taxes and subsidies more easily
Refer to Figure 4-9. What area represents consumer surplus after the imposition of the price floor?
A) A + B B) A + B + E C) A + B + E + F D) A
What is the MOST recent set of negotiations at WTO called?
a. the Doha round b. the Kyoto round c. the Geneva accord d. the Paris negotiation
How can advertising reduce firms’ market power?
a. by conveying the prices they charge b. by accusing them of being monopolies c. by creating a demonstration effect d. by misleading consumers