Explain what the IP curve is and why it is upward sloping
What will be an ideal response?
The IP curve represents the combinations of i and E that maintain the interest parity condition. As i falls, foreign bonds will have a higher expected return. The demand for the dollar will fall causing an immediate depreciation. So, the drop in i causes E to fall. E will fall until all of the drop in i is offset by the expected appreciation of the dollar.
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A tradeoff is
A) represented by a point inside a PPF. B) represented by a point outside a PPF. C) a constraint that requires giving up one thing to get another. D) a transaction at a price either above or below the equilibrium price.
A table that shows the relationship between the price of a good and the quantity demanded of that good is called a
a. price-quantity schedule. b. buyer schedule. c. demand schedule. d. demand curve.