Author Question: When EP /P rises A) IM will rise. B) IM will fall. C) IM may rise or fall. D) IM is not ... (Read 38 times)

karen · **on:** Jun 30, 2018

When EP /P rises

A) IM will rise.
B) IM will fall.
C) IM may rise or fall.
D) IM is not affected.
E) IM and P will both rise.

Question 2

Why is it true that exchange rates tend to be equal worldwide? Briefly explain.

What will be an ideal response?

Briannahope · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

Explain that arbitrage would result in equal exchange rates, and end when transactions costs are equal to the difference in exchange rates.