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Question
Consider a typical individual who owns the following financial instruments: A life insurance policy for $250,000; a certificate of deposit for $10,000; homeowner's and auto insurance policies; $50,000 in a mutual fund, and $150,000 in her pension fund at work. Which of these are instruments used primarily as stores of value and which are being used to transfer risk?Answer
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Related questions
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The strong appreciation of the dollar for the last part of the 1990s: A. was a benefit to all U.S. residents but costly to most foreign producers.B. was a benefit to U.S. exporters, but put a severe strain on U.S. Importers.C. was welcomed by all U.S. manufacturers.D. played a key role in keeping inflation in check even though the economy was growing rapidly.
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An increase in the real interest rate on U.S. bonds, everything else equal, will have the following impact on the foreign exchange market: A. the demand for dollars will decrease.B. the supply of dollars will increase.C. the dollar will depreciate relative to foreign currencies.D. the demand for dollars will increase.
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The empirical evidence on purchasing power parity seems to point out that: A. purchasing power parity can explain long run movements in exchange rates but does not hold up to scrutiny for short-run changes.B. purchasing power parity does a good job of explaining short-run movements in exchange rates, but does not hold up to scrutiny over the long run.C. purchasing power parity is a good theory for international trade, but is of little use in explaining exchange rate movements.D. inflation and a country's rate of currency appreciation are positively correlated.
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One reason the theory of purchasing power parity may not explain price differences between countries is: A. real exchange rates are almost impossible to calculate.B. inflation rates differ across countries.C. some products do not trade.D. nominal exchange rates are flexible.
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