A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is
A) speculating.
B) demonstrating purchasing power parity.
C) engaging in interest rate arbitrage.
D) responding to fluctuations in the business cycle.
E) ignoring the nominal rate of exchange.
C
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The supply curve shows a(n) ________ relationship between price and quantity and is therefore ________ sloping
A) direct; downward B) direct; upward C) inverse; downward D) inverse; upward
Using historical statistics is likely to produce accurate estimates of demand curves since such studies have large amounts of data to draw on.
Answer the following statement true (T) or false (F)
The IS curve ________
A) shows the relationship between aggregate output and the real interest rate when the goods market is in equilibrium B) tells us that increases in autonomous consumption, investment, government purchases, or net exports raise output for any real interest rate C) tells us that a decrease in taxes or in financial frictions leads to an increase in output for any given real interest rate D) all of the above E) none of the above
An asset whose value is based on the value of another asset is called a:
A. derivative. B. dividend. C. stock. D. bond.