​According to the IFE, If British Interest Rates Exceed U

question 42

Multiple Choice

​According to the IFE, if British interest rates exceed U.S. interest rates:

• A) ​the British pound's value will remain constant.
• B) ​the British pound will depreciate against the dollar.
• C) ​the British inflation rate will decrease.
• D) ​the forward rate of the British pound will contain a premium.
• E) ​today's forward rate of the British pound will equal today's spot rate.

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Definitions:

Comparative Advantage

Being able to manufacture a good or provide a service with a smaller opportunity cost than that of competing individuals, companies, or nations.

Absolute Advantage

The capacity of an entity to create a product or offer a service more effectively than its rivals, utilizing fewer resources.

Absolute Advantage

A country's ability to produce a certain good more efficiently than another country can.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others, enabling trade and increased efficiency.