There can be an opportunity for covered interest arbitrage if:
a. the interest rate is low and the exchange rate is high.
b. the forward/spot rate difference is either larger or smaller in percentage terms than the difference in the interest rates on two currencies.
c. there is a time lag on the settlement of the transactions.
d. the interest rate is high and the exchange rate is low.
Ans: b. the forward/spot rate difference is either larger or smaller in percentage terms than the difference in the interest rates on two currencies.
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For an inferior good, a decrease in demand is caused by
A) a rise in income. B) a fall in income. C) a rise in price. D) a fall in price.
If an additional worker costs you $15 per hour and can add 10 units per hour of output to the firm, you should hire that person as long as
A. demand for your product is increasing and you sell in a competitive market. B. the product price is at least $1.50. C. the value of marginal product is between $10 and $14. D. the marginal product of the worker is greater than the value of the marginal product.
To make things simpler and focus attention on what really matters, economists:
A. use assumptions. B. ignore all variables. C. think at the margin. D. respond to incentives.
In order to maximize profit, a perfectly competitive firm should select the level of output where
a. marginal revenue equals price b. marginal cost equals marginal revenue c. price exceeds marginal cost d. price exceeds marginal revenue e. total revenue equals total cost