Which of the Following Statements Is Correct

question 14

Multiple Choice

Which of the following statements is correct?

• A) A currency with a higher interest rate will sell at a forward premium.
• B) A currency with a higher interest rate will sell at a forward discount.
• C) A currency with a higher interest rate will have a higher spot rate.
• D) A currency with a higher interest rate will have a lower spot rate.

---

Definitions:

Average Total Cost

Total cost divided by the number of units produced. It is sometimes called per-unit cost.

Long Run

A time period long enough to allow the firm to vary all of its factors of production.

Price Searchers

Firms that face a downward-sloping demand curve for their product. The amount the firm is able to sell is inversely related to the price it charges.

Price Takers

Sellers who must take the market price in order to sell their product. Because each price taker's output is small relative to the total market, price takers can sell all their output at the market price, but they are unable to sell any of their output at a price higher than the market price.