Assume the interest parity condition holds and that initially i = i*. A reduction in the domestic interest rate will cause
A) an increase in the demand for the domestic currency.
B) a reduction in E.
C) an expected depreciation of the domestic currency.
D) all of the above
D
You might also like to view...
"Given the long run implication of Solow's growth model with respect to the rate of savings, the low savings rate in the United States is not a problem." This statement overlooks that over time it appears that
A) total factor productivity and the growth rate of capital per person are positively related. B) total factor productivity and the growth rate of capital per person are inversely related. C) total factor productivity and the difference between the growth rates of capital per capita and population are not related a and k - n are not related. D) savings rates and per capita growth rates are inversely related.
First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000 . If FNB receives an additional deposit of $100,
a. then it has required reserves of $210 and holds excess reserves of $10. b. then it has required reserves of $10 and holds excess reserves of $20. c. then it has required reserves of $110 and holds excess reserves of $190. d. then it has required reserves of $110 and holds excess reserves of $0.