Before Arbitragers Take Action with Respect to Exchange Rate Differentials

question 47

Multiple Choice

Before arbitragers take action with respect to exchange rate differentials

• A) central bank approval must be obtained.
• B) loans to cover transactions must be obtained.
• C) a market differential of at least 1¢ must exist between two currencies.
• D) a differential of as little as 1/16 of 1¢ may trigger action.

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Definitions:

Assimilation

Piagetian concept of the incorporation of new information into existing knowledge.

Equilibrium

A state of balance or stability within a system, achieved when opposing forces or influences are equal.

Cognitive Development

The construction of thought processes, including remembering, problem solving, and decision-making, from childhood through adolescence to adulthood.

Disequilibrium

The state of being out of balance or lacking stability, often used in contexts of cognitive development or economics.