Arbitrage opportunities exist when uncovered interest rate parity does not hold
Indicate whether the statement is true or false
FALSE
Explanation: Carry trade involves risk. Arbitrage opportunities may appear when transactions costs are low and covered interest rate parity does not hold.
You might also like to view...
According to the theory based on rational expectations and flexible wages and prices,
A) only the combination of discretionary fiscal policy and conservative monetary policy can affect real GDP in the long run. B) neither fiscal nor monetary policy influence real GDP in the long run. C) fiscal policy has less effect on real GDP than monetary policy in the long run. D) monetary policy has less effect on real GDP than fiscal policy in the long run.
Which of the following is NOT a tool used by the Fed to implement monetary policy?
A. Printing Federal Reserve notes and minting coins B. The discount rate C. The reserve requirement D. Open market operations
Actions by the Second Bank of the United States:
a. reduced the discount rate on state bank notes. b. increased the discount rate on state bank notes. c. created inflation. d. effectively ended the use of state bank notes.
Suppose Bank-in-the-Box is a monopolist in its market area. If the market wage rate of bank tellers rises, the bank will
a. maintain price and suffer losses b. raise price and earn greater profit c. raise price but earn less profit d. lower price to boost sales e. shut down if AVC is less than price