What is uncovered interest parity? Explain. What will be an ...

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What is uncovered interest parity? Explain.
 
  What will be an ideal response?

Question 2

For this question, assume that the Phillips curve equation is represented by the following: t - t-1 = (m + z) - ut. Which of the following will cause a reduction in the natural rate of unemployment?
 
  A) an increase in m
  B) an increase in z
  C) an increase in
  D) an increase in actual inflation
  E) an increase in expected inflation

[Liddy]

Answer to Question 1

Uncovered interest parity or interest parity, is an arbitrage condition stating that the expected rates of return in terms of domestic currency on domestic bonds and foreign bonds must be equal. Interest parity implies that the domestic interest rate approximately equals the foreign interest rate minus the expected appreciation rate of the domestic currency.

Answer to Question 2

C

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Thank you

[Liddy]

Happy to help you