There are several reasons why interest rate parity may not hold exactly and, therefore, we can earn arbitrage profits from this situation
Indicate whether the statement is true or false
FALSE
Explanation: Transaction costs, differential taxation, government controls, political risk, and time lags between observing a profit opportunity and actually trading to realize the profit are the reasons that we can not earn arbitrage profits on a permanent basis.
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For a firm in a perfectly competitive market, if it produces where marginal cost exceeds marginal revenue it:
A. should cut back production to increase profits. B. should increase production to increase profits. C. is producing a profit-maximizing quantity. D. is impossible to tell if it is actually maximizing profits.
Expansionary monetary policy involves actions that:
A. reduce the money supply in order to decrease aggregate demand. B. increase the money supply in order to decrease aggregate demand. C. reduce the money supply in order to increase aggregate demand. D. increase the money supply in order to increase aggregate demand.
______ concentrate power in the national government.
A. Federal countries B. Bicameral countries C. Unitary countries D. Higher law constitutions
In a store that sells souvenirs, suppose an agent receives a $1 commission for each unit sold, and the principal receives the residual profit. As a result,
A) joint profit is maximized. B) the agent will sell until the principal's marginal cost equals $1. C) no agent would enter into such a contract. D) the agent wishes to sell as many units as he can.