1) The International Fisher Effect states that inflation rates are equal across
ID: 2628094 • Letter: 1
Question
1) The International Fisher Effect states that inflation rates are equal across the world.
true / false
2)If forward rates are unbiased estimators of future spot rates, they
2
A)
always correctly predict spot rates.
B)
always correctly predict the direction to which the spot rate will move.
C)
are equally likely to over-predict and under-predict the future spot rate.
d) are unrelated to the interest rate markets.
3)The Balance of Payments approach is most useful under fixed exchange rates
TREU/FALSE
4) In theory, the BOP balances itself under floating exchange rates
TRUE/FALSE
5) In the Russian Crisis of 1998, a big role was played by
A) the country's large trade surplus.
B) a sudden decline in the country's trade balance.
C) an artificially high fixed exchange rate.
D)
weak efforts from the Central Bank to stabilize the situation.
A)
always correctly predict spot rates.
B)
always correctly predict the direction to which the spot rate will move.
C)
are equally likely to over-predict and under-predict the future spot rate.
d) are unrelated to the interest rate markets.
Explanation / Answer
1) False
2) C. Are equally likely to over-predict and under-predict the future spot rate
3) True
4) True
5) C) an artificially high fixed exchange rate
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