For this question, assume that interest parity holds, the future ...

[gonzo233]

For this question, assume that interest parity holds, the future expected exchange rate is constant, the current nominal exchange rate is 1.2, the one-year foreign interest rate is 6 and the one-year domestic interest rate is 3. Given this information, one can conclude that
 
  A) financial market participants expect that the exchange rate (E) will increase by 3 over the coming year.
  B) financial market participants expect that the exchange rate (E) will decrease by 3 over the coming year.
  C) financial market participants expect that the domestic currency to depreciate by 3 over the coming year.
  D) financial market participants expect that the exchange rate (E) will increase by 20 over the coming year.

Question 2

Suppose the following situation exists for an economy: Kt+1/N = Kt/N. Given this information, we know with certainty that
 
  A) the economy is operating at the golden rule equilibrium in period t.
  B) saving per worker is less than depreciation per worker in period t.
  C) saving per worker is greater than depreciation per worker in period t.
  D) investment per worker equals depreciation per worker in period t.

[ntsoane kedibone]

Answer to Question 1

A

Answer to Question 2

D