Suppose That the One-Year U

question 51

Multiple Choice

Suppose that the one-year U.S.interest rate is 8% and the equivalent one-year India interest rate is 12%.Using the exact covered interest parity,the dollar is expected to:

• A) depreciate by 3.6%.
• B) depreciate by 50%.
• C) appreciate by 3.6%
• D) appreciate by 50%.

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Definitions:

Lerner Index

A measure of a firm's pricing power and market control, calculated as the difference between price and marginal cost, divided by price.

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes in response to a change in its price.

Lerner Index

An economic measure of a firm's market power, calculated as the difference between price and marginal cost relative to price, indicating the degree of monopoly power.

Monopoly Power

The degree of power held by a monopoly, characterized by the ability to control market prices and exclude competitors within a particular market or industry.