Explain the effect on the demand for dollars in the foreign exchange market of an increase in the U.S. interest rate differential
What will be an ideal response?
As the U.S. interest rate differential increases, international investors can obtain a greater return by holding U.S. assets. Therefore these investors want to buy more U.S. assets, such as bonds. But in order to buy more U.S. assets, they need more dollars. Hence the increase in the U.S. interest rate differential leads to an increase in the demand for dollars in the foreign exchange market and so the demand curve for U.S. dollars shifts rightward.
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Wendy works as a teller at a bank for a fixed salary of $1,800 per month. She is offered a job as a salesperson at which there is a 40 percent chance that she will make $5,000 a month and a 60 percent chance that she will make only $1,000 a month
The figure shows Wendy's utility of wealth curve: a) What is Wendy's expected income from the offered job? b) What is Wendy's expected utility from the offered job? c) Will Wendy accept the offer? Why or why not? d) What is the minimum fixed salary for which Wendy will continue to work for the bank and not take the sales job?
When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed:
A. provides funds to troubled banks that cannot find any other source of funds. B. serves as a clearinghouse for interbank payments. C. sets reserve requirements.