Author Question: Countries such as the United States that have large populations tend to have A) higher ... (Read 191 times)

Ebrown · **on:** Jun 30, 2018

Countries such as the United States that have large populations tend to have

A) higher trade-to-GDP ratios.
B) lower trade-to-GDP ratios.
C) relatively greater capital outflows.
D) relatively smaller capital outflows.

Question 2

Explain the forecast error, ut+1, in terms of: (1 ) Its equation (what it is equal to) (2 ) How it is used (3 ) Its accuracy

What will be an ideal response?

phuda · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

B

Answer to Question 2

(Et+1 - Et)/Et - ( - Et)/Et this equation represents actual minus expected depreciation, where ut+1 is the forecast error made in predicting future depreciation.
Under interest parity the equation ((Et+1 - Et)/Et - (Rt - Rt ) would also be correct, this equation represents the actual currency depreciation minus the interest difference
Statistical methods have been used to see if the forecast error is predictable through the use of past information. Indeed, a number of researchers have found that ut+1 CAN be predicted.