For this question, suppose the domestic interest rate is 4 and that the foreign interest rate is 7. And finally, assume that the domestic currency is expected to depreciate by 3 during the coming year. Given this information, we know that
A) individuals will only hold domestic bonds.
B) individuals will only hold foreign bonds.
C) individuals will be indifferent about holding domestic or foreign bonds.
D) the interest parity condition holds.
Question 2
Graphically illustrate (using the WS and PS relations) and explain the effects of an increase in the minimum wage on the equilibrium real wage, the natural rate of unemployment, the natural level of employment, and the natural level of output.
What will be an ideal response?