Economics

Question 1

Covered Interest Rate Parity (price/base) (foreign/domestic)

Answer 1

F = S [ 1 + i ( actual/360) ]
___________________
[ 1 + i (actual/360) ]

Question 2

Uncovered Interest Rate Parity

Answer 2

%∆S = i - i
f/d f d

expected change in spot exchange rate should be reflected in the interest rate differential

Question 3

Forward Rate Parity

Answer 3

Unbiased predictor of spot rate if CIRP and UCIRP holds

Question 4

Absolute Purchasing Power Parity

Answer 4

S = P (foreign)
f/d _____________
P (domestic)

Question 5

Relative PPP

Answer 5

%∆S ≅ π − π
f/d f d

Question 6

Ex Ante PPP

Answer 6

%∆S (e) ≅ π (e) − π (e)
f/d f d

Question 7

Real Interest Rate Parity

Answer 7

if UCIRP and Ex Ante PP holds then
real interest rate (domestic) = real interest rate (foreign)

Question 8

International Fischer Effect

Answer 8

If real interest rate parity holds,
the foreign domestic nominal yield spread is determined solely by the foreign domestic expected inflation differential

i - i = π(e) - π(e)
f d f d

Question 9

High Capital Mobility

Answer 9

Draw the table

         \+ Mon      -Mon \+ Fis         ?              high -Fis          low             ?

Question 10

Low Capital Mobility

Answer 10

Draw the table

         \+ Mon      -Mon \+ Fis         low           ? -Fis            ?             high

Question 11

Solow Growth Accounting Equation

Answer 11

∆Y/Y = ∆A/A + α (∆K/K) + (1-α) (∆L/L)

Question 12

Net Regulatory Burden

Answer 12

= Cost of regulation - benefits of regulations