Question

If the purchasing power parity and uncovered interest parity conditions simultaneously hold true, then it is unambiguously true that:

Select one:

a. people can profit from arbitrage in goods and financial markets.

b. real interest rates are equalized.

c. foreign exchange markets are efficient.

d. there is covered interest parity.

If country X has a relative abundance of capital and country Y has a relative abundance of labor, then the factor proportions theory predicts that:

Select one:

a. if the two nations begin trading with one another, capital will flow to country Y and give it a relative abundance of both inputs.

b. country Y will have a comparative advantage in producing capital-intensive products.

c. country X will have a comparative advantage in producing capital-intensive products.

d. if the two nations begin trading with one another, labor will move to country X and give it a relative abundance of both inputs.

The monetary base includes which of the following?

Select one:

a. savings deposits at private banks

b. loans extended by private banks

c. domestic credit at the central bank

d. transactions deposits at private banks

Past information is relevant:

Select one:

a. for the formation of neither adaptive nor rational expectations.

b. for the formation of rational expectations only.

c. for the formation of adaptive expectations only.

d. for the formation of both adaptive and rational expectations.

Answer 1