Traders operate on the principle that the ______ the value of the nominal exchange rate (E), the ______ it is to purchase foreign currency, and the _____ its return measured in the domestic currency.

Which of the following is true?

i. A rational choice is made on the margin. ii. Microeconomics is the study of the national economy while macroeconomics is the study of the global economy. iii. Economists try to understand how the economic world works by testing normative statements. A) only i B) i and iii C) only ii D) only iii E) i and ii

Adjusted for risk, interest rate parity

A) holds only for larger countries. B) holds only between the U.S. and Canada. C) holds only when purchasing parity holds. D) always holds.