The Figure Given Below Depicts the Foreign Exchange Market for British

question 40

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Suppose the 12-month interest rate on a U.S. Treasury bill is 16 percent, and the one-year interest rate on a comparable British Treasury bill is 6 percent. The exchange rate today is $2.00 per pound. What must be the expected exchange rate at maturity for interest rate parity to hold?

• A)$1.00 = 0.50 pound
• B)$1.00 = 0.75 pound
• C)1 pound = $2.20
• D)1 pound = $1.80
• E)1 pound = $2.50

Understand the significance of comparing actual to planned results and the utility of budget reports.

Grasp the concept of flexible budgeting and its adaptability to various levels of activity.

Understand the concept and calculation of the fiscal multiplier and the marginal propensity to consume (MPC).

Understand the relationship between federal budget deficits/surpluses and the national debt.

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