Arbitragers Applying Covered Interest Arbitrage Drive the International Currency and Money

question 2

Multiple Choice

Arbitragers applying Covered Interest Arbitrage drive the international currency and money markets toward the equilibrium described by:

• A) the effective exchange rate index.
• B) the purchasing power parity.
• C) the nominal effective exchange rate index.
• D) the interest rate parity.

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Definitions:

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain, such as minerals, forests, water, and fertile land.

Dust Bowl

A period of severe dust storms in the 1930s that greatly damaged the ecology and agriculture of US and Canadian prairies.

Great Plains

A broad expanse of flat land, covered in prairie, steppe, and grassland, located in the central United States and Canada.

Chlorofluorocarbons (CFCs)

Man-made chemical compounds once used in air conditioning, refrigeration, and aerosol propellants, known to deplete the ozone layer.