If the Interest Rate on a U

question 23

Multiple Choice

If the interest rate on a U.S.one-year bond is 2%,the interest rate on a Brazilian one-year bond is 8%,and the currency premium on reals (Brazilian currency) is 3%,what is the expected rate of appreciation of the U.S.dollar according to interest-rate parity?

• A) -3%
• B) 3%
• C) 5%
• D) 6%

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Definitions:

LED Light Bulbs

Energy-efficient lighting devices that use light-emitting diodes to produce light, known for having a longer lifespan and lower energy consumption compared to traditional bulbs.

Marginal Utility Per Dollar

The additional satisfaction gained from spending one more dollar on a good or service.

Substitution Effect

The substitution effect occurs when consumers change their consumption of goods in response to changes in relative prices, substituting cheaper goods for more expensive ones.

Quantity Demanded

Quantity demanded refers to the amount of a good or service that consumers are willing and able to purchase at a given price.