Which of the following is NOT linked together by uncovered interest parity?
A. The domestic interest rate
B. The foreign interest rate
C. The current spot exchange rate
D. The current forward exchange rate
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If investors expect a decrease in the value of the Thai baht vis-à-vis other currencies, their actions will cause:
A. a decrease in Thai interest rates.
B. the expected depreciation to occur much faster.
C. the Thai baht to appreciate immediately.
D. a large inflow of foreign capital into Thailand.
The _____ effect suggests that speculations can sometimes be destabilizing as the actions of the international investors move the exchange rate away from the long-run equilibrium value consistent with fundamental economic influences.
A. bandwagon
B. overshooting
C. exchange rate
D. arbitrage
The law of one price works well for _____ traded commodities.
A. all
B. rarely
C. heavily
D. domestically
_____ purchasing power parity states that the difference between changes over time in product-price levels in two countries will be offset by the change in the exchange rate over this time.
A. Full
B. Partial
C. Relative
D. Absolute