For an investor who starts with dollars and wants to end up with dollars in the future, which of the following choices is an example that includes speculating?
A. Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and then buy dollars at the future spot rate
B. Buy a dollar-denominated financial asset
C. Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy dollars
D. Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to sell the foreign currency
Answer: A
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A principal feature of a command economy is that
Which of the following statements best describes the circumstances in which exchange rates are beneficial to bank or government borrowing?
a. A bank or government will benefit by borrowing in a domestic currency and lending in a foreign currency, provided the exchange rate does not shift. b. A bank or government will benefit by borrowing in a foreign currency and lending in a domestic currency works well, provided the exchange rate does not shift. c. A bank or government will benefit by borrowing in a foreign currency and lending in a domestic currency works well, provided the exchange rate increases. d. A bank or government will benefit by borrowing in a foreign currency and lending in a domestic currency works well, provided the exchange rate decreases.
If Johnny is willing to pay up to $3 for an ice-cream cone but she actually pays $1 for it. The consumer surplus of the ice-cream cone for Johnny
A) is $1. B) is $2. C) is $4. D) cannot be determined without information about the market structure.
For this question, assume that the expected rate of inflation is a function of past year's inflation. Also assume that the unemployment rate has greater than the natural rate of unemployment for a number of years. Given this information, we know that
A) the rate of inflation will approximately be equal to zero. B) the rate of inflation should neither increase nor decrease. C) the rate of inflation should steadily increase over time. D) the rate of inflation should steadily decrease. E) the inflation rate will be approximately equal to the natural rate of unemployment.