The interest rate on some Brazilian bank accounts is 700 percent per year. If you put 1 Brazilian real (Brazil's currency) in a bank today, it will be worth 8 reals next year! Why then don't we all wire our U.S. dollars to Brazilian banks?
a. The Brazilian government keeps the exchange rate fixed during the year, which wipes out your financial gain
b. The Brazilian balance of payments becomes negative, which results in higher taxes, much of it from your financial gain.
c. The U.S. government prohibits U.S. investment in foreign financial institutions.
d. People engaging in arbitrage will quickly adjust the rates to make the Brazilian interest rate no more attractive than U.S. interest rates.
e. The exchange rate reals per dollar adjusts during the year so that you are no better off once you convert your reals back into dollars.
E
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Indicate whether the statement is true or false
The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?
A. Consumer incomes and the quantity of labor have decreased. B. The prices of imported resources have increased. C. National income abroad has increased. D. Business costs and wage rates have decreased.
The demand for autos is likely to be:
A. less price elastic than the demand for Honda Accords. B. more price elastic than the demand for Honda Accords. C. of the same price elasticity as the demand for Honda Accords. D. perfectly inelastic.
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, economic profit will be:
A. $10.
B. $19.
C. $6.
D. $8.