Given an Efficient Foreign Exchange Market, the Spot Rate Is

question 11

True/False

Given an efficient foreign exchange market, the spot rate is the rational approximation of the markets expectation of the forward rate that will exist at the end of the forward period.

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Definitions:

Saving

The portion of income not spent on consumption, often put aside for future use or investment.

Disposable Income

The amount of money an individual or household has available to spend or save after income taxes have been deducted.

Disposable Income

Money that becomes available for household savings and expenditures after income taxes are subtracted.

MPS

Marginal Propensity to Save, which is the proportion of an increase in income that is saved rather than spent on consumption.