Using the UIP Equation, Equilibrium in the Short Run Occurs

question 91

Multiple Choice

Using the UIP equation, equilibrium in the short run occurs when:

• A) arbitrage is possible.
• B) the spot rate is such that foreign and domestic investment returns are equalized.
• C) the spot rate is less than the forward rate.
• D) foreign interest rates are higher than domestic rates of interest.

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Definitions:

Economic Profit

The difference between total monetary revenue and total costs, including both explicit and implicit costs.

Regulatory Agency

A government body responsible for enforcing laws and regulations to protect public interest in specific sectors, such as healthcare, finance, and the environment.

Profit Maximized

The point at which a company achieves its highest level of profit through the optimal balance of cost and revenue.

Charging Price

The act of setting a specific price for a product or service offered to consumers.