Use the (Hypothetical) Information in the Following Table to Answer

question 142

Multiple Choice

Use the (hypothetical) information in the following table to answer the following questions.Table 18-2
$\begin{array}{|l|l|c|l|c}\hline \text { Country } & \text { Currency } & \begin{array}{l}\text { Currency per } \\\text { U.S. Dollar }\end{array} & \begin{array}{l}\text { U.S. Price } \\\text { Index }\end{array} & \begin{array}{l}\text { Country Price } \\\text { Index }\end{array} \\\hline \text { Bolivia } & \text { boloviano } & 8.00 & 200 & 1600 \\\hline \text { Japan } & \text { yen } & 80.00 & 200 & 20,000 \\\hline \text { Morocco } & \text { dinar } & 10.00 & 200 & 2,000 \\\hline \text { Norwegian } & \text { kroner } & 6.5 & 200 & 1,500 \\\hline \text { Thailand } & \text { baht } & 40.00 & 200 & 7,000 \\\hline\end{array}$

-Refer to Table 18-2. Which currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

• A)boloviano and dinar
• B)yen, kroner, and baht
• C)yen and kroner
• D)baht

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Definitions:

Normal Yield Curve

A graphical representation that shows interest rates on bonds of different maturities tend to increase the longer the term to maturity, under normal market conditions.

Expected Inflation

The anticipated rate at which the general level of prices for goods and services will rise over a period.

Expectations Theory

A theory that explains the term structure of interest rates based on the anticipation that the rates will move toward the average rate over the long term.

Yield Curve

A graph showing the relationship between bond yields and their maturities, often used to predict changes in economic output and interest rates.