Recently Mario Learned That a New Employee Was Hired at His

question 56

Multiple Choice

Recently Mario learned that a new employee was hired at his company,and that she was starting out at a salary that is equivalent to his.The only problem for Mario,however,is that he has been working at the company for two years already.He is suddenly gripped with the sense that he is being underpaid,even though he had no problem with his salary just yesterday.Mario's new sense of dissatisfaction is explained by the __________ theory.

• A) equivalency
• B) equity
• C) even rewards
• D) incentive

---

Definitions:

Exchange Rates

The expression of one currency's value in the terms of the value of another currency.

Covered Interest Arbitrage

A strategy involving the investment in differing currencies in order to exploit differences in interest rates, while hedging exchange rate risk.

Uncovered Interest Parity

A theory in finance which posits that the disparity in interest rates across two nations matches the anticipated shift in exchange rates between their respective currencies.

International Fisher Effect

An economic theory predicting that the difference in nominal interest rates between two countries is equal to the expected change in their exchange rates over a specific period.