Chapter 12 Flashcards
1
Q
Calculate real exchange rates
A
(exchange rate * C price) / foreign price
2
Q
purchasing power parity
A
currency should be able to buy the same quantity of goods in all countries
3
Q
interest rate theory (what is it?)
A
real interest rate on comparable financial assets should be the same in all economies
4
Q
limitations to interest rate theory
A
- real interest rate in C is not always equal to interest rate in read of world
5
Q
nominal exchange rate
A
the rate of trading the currency of one country for another
