Suppose the interest rate on one-year U.S. T-bills is 4 percent and the interest rate on one-year British T-bills is 6.5 percent. If the dollar is at a one-year forward premium against the British pound of 3 percent, the covered interest differential is
A. equally favoring investments in both nations.
B. in favor of investments in the United States.
C. the same as the uncovered interest differential.
D. in favor of investments in the United Kingdom.
Answer: B
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Suppose that John allocates $10,000 of his disposable income for necessities. Any additional income beyond that is both spent and saved. Assume he has a disposable annual income of $50,000 and an MPC=0.8. Based on this information the amount of money John should save would be:
A. $10,000. B. $40,000. C. $12,000. D. $8,000.
The concept of scarcity as used by economists refers to:
a. a situation of excess supply. b. a situation in which the available resources are not enough to satisfy the wants of the people at a zero price. c. a situation in which an item is available only in very small quantities. d. a situation in which an item is very expensive. e. a situation in which a resource is nonrenewable.
Equilibrium real GDP is
a. independent of the price level b. determined solely in the loanable funds market c. controlled by the Fed d. directly related to the interest rate e. the level of output at which total spending equals total output for a given price level
The exchange rate is the
a. value of money b. quantity of dollars, yen, etc., that are traded c. amount of a foreign currency that is used to buy goods made in your country d. number of units of your currency that it takes to buy one unit of a foreign currency e. number of units of a foreign currency that can be bought with one unit of your own currency