Which of the Following Parity Conditions Is (Are)correct

question 60

Multiple Choice

Which of the following parity conditions is (are) correct?

• A) The interest-rate parity theory states that the forward premium/discount should be equal and opposite in size to the national interest rate differential.
• B) The purchasing-power parity theory states that in the long run exchange rate changes tend to reflect international differences in inflation rates.
• C) The international Fisher effect states that national interest rate differentials are the result of inflation differentials.
• D) All of the above are correct.

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Definitions:

Slope Coefficients

In linear regression, the slope coefficient measures the rate of change in the dependent variable for a one-unit change in the independent variable.

Dependent Variable

A variable in statistical modeling, experiments, or observations that is expected to change as a result of manipulations in the independent variable(s).

Independent Variables

Variables that are manipulated or categorically varied by researchers in an experiment to determine their effect on dependent variables.

Multicollinearity

Refers to a situation in statistics where independent variables in a regression model are highly correlated, potentially leading to difficulties in estimating the relationship between each independent variable and the dependent variable.