If UIP holds, the interest rate is 4%, and the foreign currency is expected to appreciate by 3%, then the foreign interest rate is approximately
a) 1%
B) 3%
C) 7%
D) none of the above
Ans: a) 1%
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The amount Jacqueline receives for selling cupcakes beyond the minimum she would be willing to sell the cupcakes for is called
A) consumer surplus. B) producer surplus. C) cooperative surplus. D) deadweight loss.
The Prisoners' Dilemma is so named because
a. the Nash equilibrium is one of the worst outcomes for the players. b. the game has no Nash equilibrium. c. the game is zero-sum. d. players end up earning a lighter sentence than the prosecutor would like.
At one time, many economists believed that
A. the government could determine the slope of the Phillips curve. B. the government could make the Phillips curve horizontal. C. the government could decide at which point on the Phillips curve the economy should be. D. the government could determine what the Phillips curve should be.
Consider two types of rules that might govern an otherwise unregulated health insurance market: (1) Insurance companies can price-discriminate against the sick and old; (2) insurance companies cannot price discriminate against the sick and old. Explain why, in equilibrium, insurance may be very expensive for the sick and old regardless of which case we find ourselves in.
What will be an ideal response?