The interest rate is 4 percent in the U.K. and 3 percent in the U.S. for 90 days. The current spot rate is $2.00/£ and the forward rate is $1.96/£. If a U.S.-based investor expects the spot rate to remain at $2.00/£ in 90 days, the expected uncovered interest rate differential would be ________ in favor of the ________ investment.
A. 2%; dollar
B. 2%; pound
C. 1%; pound
D. 1%; dollar
Answer: C
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To compare the purchasing power of nominal wages in two different years, one must:
A. deflate both quantities by a common price index. B. adjust both quantities by the real interest rate. C. increase both quantities by the same percentage increase in a price index. D. compare the nominal values.
The RBC model tells us that
A) as the real wage rate rises, the amount of labor supplied and thus output produced falls. B) as the price level rises, the real wage rises, thus raising the amounts of labor supplied and output produced. C) as the real interest rate rises, the amount of labor supplied and thus output produced rises. D) as the price level rises above the expected price level, actual output rises above the natural real GDP.
The statement "Resources employed in producing X are better suited to making Y" is another way of saying resources
a. are specialized. b. are scarce. c. are used inefficiently. d. are unproductive. e. have no opportunity cost.
Who sets the rules for entitlements when spending is authorized under this category?
A. the President B. the agency involved C. the Congress when it appropriates the spending D. each individual state