If the Exchange Rate Follows a Random Walk

question 61

Multiple Choice

If the exchange rate follows a random walk

• A)the future exchange rate is unpredictable.
• B)the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t + 1).
• C)the best predictor of future exchange rates is the forward rate F_t = E(S_t + 1/I_t).
• D)the future exchange rate is expected to be the same as the current exchange rate,S_t = E(S_t + 1),and the best predictor of future exchange rates is the forward rate F_t = E(S_t + 1/I_t).

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Definitions:

Epidemiologic Transition

A phase of development witnessed by a sudden and stark increase in population growth rates brought by medical innovation in disease or disease control.

Mortality

The incidence of death within a population; the rate at which deaths occur in a particular population, typically expressed per thousand individuals per year.

Demographic Transition

The transition from high birth and death rates to lower birth and death rates as a country develops from a pre-industrial to an industrialized economic system.

Oral Rehydration Therapy

A simple, cost-effective treatment for dehydration, especially due to diarrhea, involving the oral intake of a solution of salts and sugars.