Consider the Following Sample Regression Equation = 150 -

question 92

Multiple Choice

Consider the following sample regression equation = 150 - 20x,where y is the demand for Product A (in 1,000s) and x is the price of the product (in $) .The slope coefficient indicates that if ______________.

• A) the price of Product A increases by $1,then on average,demand decreases by 20
• B) the price of Product A increases by $1,then on average,demand increases by 20
• C) the price of Product A increases by $1,then on average,demand decreases by 20,000
• D) the price of Product A increases by $1,then on average,demand increases by 20,000

---

Definitions:

Covered Interest Arbitrage

A strategy that involves converting currency through the spot exchange market, investing in foreign interest bearing securities, and hedging exchange risk through the forward market to earn riskless profit.

Forward Rate

The predicted interest rate for a loan or investment for a specific period in the future, differing from current rates.

Nominal Risk-Free Rate

The rate of return on an investment with no risk of financial loss, not taking into account inflation.

Purchasing Power Parity

An economic theory that suggests exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.