Assume That the Interest Parity Holds and That the Dollar

question 56

Multiple Choice

Assume that the interest parity holds and that the dollar is expected to appreciate against the pound.Given this information,we know that

• A)U)S. and U.K. interest rates are equal.
• B)the U.S. interest rate exceeds the U.K. interest rate.
• C)the U.K. interest rate exceeds the U.S. interest rate.
• D)individuals will prefer to hold U.S. bonds because the U.S. interest rate exceeds the U.K. interest rate.
• E) none of the above

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Definitions:

Few Firms

A market situation typically characterized by an oligopoly, where a small number of companies possess the majority of market share.

Tacit Collusion

An unwritten, unspoken understanding among competitors to set prices or production levels to avoid direct competition.

Formal Agreement

A legally binding contract or arrangement between two or more parties, often documented and enforceable by law.

Duopolists

Firms or entities within an oligopoly that specifically consist of only two producers or sellers in the market.