Suppose the interest rate on one-year U.S. T-bills is 4 percent and the interest rate on one-year British T-bills is 6.5 percent. If the dollar is at a one-year forward premium against the British pound of 3 percent, the covered interest differential is
A. equally favoring investments in both nations.
B. in favor of investments in the United States.
C. the same as the uncovered interest differential.
D. in favor of investments in the United Kingdom.
Answer: B
Economics
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The International View of the Great Depression blames the contraction in the U.S. economy on
(a) the failure of the U.S. markets to permit a fall in aggregate prices under the gold standard or to devalue its exchange rate. (b) exports' and imports' large proportion of total GDP in the U.S. (c) Great Britain abandoning the gold standard. (d) all of the above.
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