Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected exchange rate in one year is $1.224. If the spot rate is $1.24, then the expected dollar return on euro deposits is:
a. 4%
b. 7.1%
c. 0.71%
d. 0.129%
Ans: c. 0.71%
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The Consumer Price Index market basket contains
A) the goods and services that the economists working for the BLS believes consumers should buy. B) the U.S.-produced goods and services purchased by an average urban household. C) the minimal dietary requirements of an average urban household. D) the goods and services purchased by an average urban household. E) the ideal calorie intake of each member of an average urban household.
Describe at least three ways that global capital markets are different today from what they were like in the late nineteenth century
What will be an ideal response?
Which of the following is true of pure monopoly?
a. Monopoly expands the options available to consumers. b. Monopoly results in allocative inefficiency. c. Profits and losses induce firms to enter and exit from industries. d. Monopoly works well when governments regulate prices.
Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?
a. The real interest rate is the nominal interest rate times the rate of inflation. b. The real interest rate is the nominal interest rate minus the rate of inflation. c. The real interest rate is the nominal interest rate plus the rate of inflation. d. The real interest rate is the nominal interest rate divided by the rate of inflation.