Suppose Interest Parity Holds

question 10

Multiple Choice

Suppose interest parity holds.There is a change in U.S.policy that leads to expectations of a higher U.S.inflation rate.The increase in expected inflation will cause dollar interest rates to _______.

• A) Stay the same.
• B) Fall.
• C) Rise.
• D) None of the above.

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Definitions:

Marginal Utility

The additional satisfaction or utility that a consumer receives from consuming one more unit of a good or service.

Utility-maximizing

Utility-maximizing refers to a principle in economics where individuals or businesses seek to achieve the highest level of satisfaction or profit from their decisions, given their resources and constraints.

Diminishing Marginal Utility

The more of any one good consumed in a given period, the less incremental satisfaction is generated by consuming a marginal or incremental unit of the same good.

Candy Bars

Sweet confectionery products that typically consist of chocolate and may include other fillings like nuts, caramel, nougat, or wafers.