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If the positive interest rate differential in favor of a foreign monetary center is 4 percent per year and the foreign currency is at a forward discount of 3 percent per year, roughly how much would an interest arbitrageur earn from the purchases of foreign three-month treasure bills if he or she covered the foreign exchange risk? ( )

A. 4%
B. 3%
C. 1%
D. 7%

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The foreign exchange market is the market in which individuals, firms, and banks buy and sell foreign currencies or foreign exchange. ()

For a small nation ( )

A. the foreign supply of exports is horizontal
B. the domestic demand for imports is horizontal
C. the foreign supply for imports is horizontal
D. the foreign supply of exports is vertical

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While adjustment under a flexible exchange rate system relies on changing the external value of the national currency, adjustment under the gold standard relies on changing internal prices in each nation. ()

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The exchange rate between dollar and pound change from $2/£1 to $1/£1 implies( )

A. an appreciation of the dollar
B. a depreciation of the dollar
C. a devaluation of the dollar
D. an exchange rate overshooting

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A. 4% B. 3% C. 1% D. 7%

The foreign exchange market is the market in which individuals, firms, and banks buy and sell foreign currencies or foreign exchange. ()

For a small nation ( )

While adjustment under a flexible exchange rate system relies on changing the external value of the national currency, adjustment under the gold standard relies on changing internal prices in each nation. ()

The exchange rate between dollar and pound change from $2/£1 to $1/£1 implies( )

A. 4%
B. 3%
C. 1%
D. 7%