Sunday
December 21, 2014

Homework Help: Economics

Posted by Anonymous on Sunday, October 2, 2011 at 1:01am.

You read in a newspaper that the nominal interest rate is 12 percent per year in Canada and 8 percent per year in the United States. Suppose that the real interest rates are equalized in the two countries and that purchasing-power parity holds.

a) Using the Fisher equation, what can you infer about expected inflation in Canada and in the United States?
b) What can you infer about expected change in the exchange rate between the Canadian dollar and the U.S. dollar?
c) A friend proposes a get-rich-quick scheme: borrow from a US bank at 8%, deposit the money in a Canadian bank at 12%, and make a 4% profit. What is wrong with this scheme?

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Economics - The nominal interest rate is 12 percent per year in Canada and 8 ...
Macroeconomics - You read in a newspaper that the nominal interest rate is 12 ...
Macroeconomics - You read in a newspaper that the nominal interest rate is 12 ...
Economics - The nominal interest rate is 12 percent per year in Canada and 8 ...
Econ - The nominal interest rate is 12 percent per year in Canada and 8 percent ...
Economics - The formula given was: (real rate of interest) = (nominal rate of ...
Economics - If the velocity of circulation is constant, real GDP is growing at 3...
ECON--HELP!?!?! - 1. In the Country of Wiknam, the velocity of money is constant...
ECON-HELP!! - 1. In the Country of Wiknam, the velocity of money is constant. ...
ECON - CAN ANYONE PLEASE HELP// 1. In the Country of Wiknam, the velocity of ...

Search
Members