For a country pursuing a fixed exchange rate regime, what does the interest parity condition imply about domestic and foreign interest rates? Explain
What will be an ideal response?
As long as the fixed exchange rate regime is credible, the interest rates must be equal. If the exchange rate regime is credible, we know that there will be no expected appreciation or depreciation so i = i*.
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The increase in the currency ratio during World War II was due to
A) bank panics. B) a drop in the rate of interest paid on checking deposits. C) the spread of ATMs. D) high taxes and illegal activities.
As the price of good X increases from $5 to $8, quantity demanded falls from 100 to 80. Based upon this information we can conclude that the demand for X is
A) elastic. B) inelastic. C) unit inelastic. D) insufficient information for judgment.
How are deficit and surplus items determined in the balance of payments?
What will be an ideal response?
Which of the following is not considered a unilateral transfer?
a. foreign aid from one government to another b. income earned from foreign investments c. personal gifts to friends in foreign countries d. donations to foreign countries from non-government domestic charities e. government transfers to foreign residents