Assume the interest parity condition holds and that initially i = ...

[melly21297]

Assume the interest parity condition holds and that initially i = i. A reduction in the foreign interest rate (i) will cause
 
  A) an increase in the demand for the domestic currency.
  B) an increase in E.
  C) an expected depreciation of the domestic currency.
  D) all of the above

Question 2

Assume that constant returns to scale exists and that N and K both increase by 2. Given this information, we know that
 
  A) output (Y) will increase by 4.
  B) Y will increase by 2.
  C) Y will increase by less than 2.
  D) Y will increase by less than 4 and more than 2.

[Bison]

Answer to Question 1

C

Answer to Question 2

B