Based on Interest Rate Parity, the Larger the Degree by Which

question 11

Multiple Choice

Based on interest rate parity, the larger the degree by which the foreign interest rate exceeds the U.S. interest rate, the:​

• A) ​larger will be the forward discount of the foreign currency.
• B) ​larger will be the forward premium of the foreign currency.
• C) ​smaller will be the forward premium of the foreign currency.
• D) ​smaller will be the forward discount of the foreign currency.

---

Definitions:

Positive Economic Statement

An objective statement based on empirical evidence that describes the world as it is. These statements can be tested and validated through observation.

Marginal Tax Rates

The rate at which tax is charged on an additional dollar of income, which can vary based on income levels and tax brackets.

Gasoline Purchased

The amount of gasoline acquired by consumers, often measured in gallons or liters, for the purpose of powering vehicles.

Scientific Method

A systematic process used for research and experimentation that involves observation, hypothesis formulation, experimentation, and conclusion to validate or invalidate a theory.