Author Question: Suppose the U.S. one-year interest rate is 3 per year, while a foreign country has a one-year ... (Read 117 times)

nevelica · **on:** Jun 30, 2018

Suppose the U.S. one-year interest rate is 3 per year, while a foreign country has a one-year interest rate of 5 per year. Ignoring risk and transaction costs, a U.S. investor should invest in foreign bonds as long as the expected yearly rate of depreciation of the foreign currency is

A) less than 5.
B) greater than 5.
C) greater than 2.
D) less than 2.
E) less than 1.

Question 2

Explain how an increase in the unemployment rate will affect bargaining power and nominal wages.

What will be an ideal response?

chloejackso · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

As the unemployment rate increases, it is more difficult for individuals to find employment at other firms. So, workers' bargaining power will fall. As bargaining power falls, the nominal wage will fall.