If the Interest Rate in the U

question 75

Multiple Choice

If the interest rate in the U.S. is i_$ = 5 percent for the next year and interest rate in the U.K. is i_£ = 8 percent for the next year, uncovered IRP suggests that

• A)the pound is expected to depreciate against the dollar by about 3 percent.
• B)the pound is expected to appreciate against the dollar by about 3 percent.
• C)the dollar is expected to appreciate against the pound by about 3 percent.
• D)both a and c

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Definitions:

Negativity

The tendency to focus on negative elements, expect the worst, and dwell on negative thoughts and feelings.

Optimistic Personality

A personality trait characterized by a general expectation that good things will happen or believing that the future will be favorable because one can control important outcomes.

Oxytocin

A hormone and neurotransmitter often associated with social bonding, reproduction, and childbirth.

Serotonin

Serotonin is a neurotransmitter that plays a key role in regulating mood, appetite, and sleep, among other functions.