What is uncovered interest parity? Explain
What will be an ideal response?
Uncovered interest parity or interest parity, is an arbitrage condition stating that the expected rates of return in terms of domestic currency on domestic bonds and foreign bonds must be equal. Interest parity implies that the domestic interest rate approximately equals the foreign interest rate minus the expected appreciation rate of the domestic currency.
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Strategic behavior is key feature in which market structure?
A. Monopoly B. Oligopoly C. Monopolistic competition D. Perfect competition
When an economy experiences deflation, investment will:
A. increase, because businesses will spend cash instead of borrowing it. B. increase, because businesses will take out loans that will increase in value. C. decrease, because businesses will spend cash instead of borrowing it. D. decrease, because businesses will not take out loans that will increase in value over time.
Which of the following can be used as money?
A. checks B. cigarettes C. precious stones D. All of these
Which of the following short-run outcomes for monopolistic competition is NOT possible?
A) P = MR = MC. B) P > MC > ATC. C) P = ATC. D) P > ATC.