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Nata [24]
3 years ago
11

Is overshooting (in theory and in practice) consistent with purchasing power parity? Consider the reasons for the usefulness of

PPP in the short run versus the long run and the assumption we’ve used in the asset approach (in the short run versus the long run). How does overshooting help to resolve the empirical behavior of exchange rates in the short run versus the long run?
Business
1 answer:
Ludmilka [50]3 years ago
6 0

Answer:

1. Yes, overshooting is consistent with PPP. Investors forecast the expected exchange rate based on the theory of PPP. When there is some change in the market, the investors know the exchange rate will change to equate relative prices in the long run. This is why we observe overshooting in the short run. The investors incorporate this information into their short-run forecasts.

2. Exchange rates are volatile in the short run. The theory's implication that there is exchange rate overshooting (in response to permanent shocks) is one explanation for short-run volatility in

exchange rates.

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Answer:

451

Explanation:

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8 0
3 years ago
Very few products are moved without at least part of their journey being by which mode of transportation?
nasty-shy [4]

Answer:

C. Highway

Explanation:

Highway mode of transportation is one of which very few products are being moved without been at least part of their journey. Highway is the most widely used mode of transportation and it is being in combination with other forms of transportation.

4 0
3 years ago
When the Fed buys bonds in open-market operations, it _______the money supply. If the Fed reduces the reserve requirement, the m
Brums [2.3K]

When the Fed buys bonds in open-market operations, it increases the money supply. If the Fed reduces the reserve requirement, the money supply increase as well.

When the Fed increases the interest rate it pays on reserves, the money supply will <u>reduce</u>. When the FOMC increases its target for the federal funds rate, the money supply will <u>reduce</u>.

If bankers decide to hold more excess reserves because they are fearful of bank runs, the money supply reduce. All the above scenarios are activities that can occur when the Federal Government is using Monetary Policy.

<h3>What is monetary policy?</h3>

Monetary policy is a collection of acts designed to govern a country's total money supply and promote economic growth.

<h3>What  are Bonds?</h3>

A bond is a fixed-income product that reflects an investor's debt to a borrower (typically corporate or governmental).

A bond may be regarded of as an I.O.U. between the lender and the borrower that includes the loan information and payments.

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7 0
2 years ago
The specific location on the floor of an exchange where a particular security is traded is called a:
JulsSmile [24]

It is called a DMM's post. A DMM's post, (Designated Market Maker) is a term used for companies. This usually applies for designing companies (such as making shoes, shirts etc). It can also be used for people that trade during stock.

4 0
3 years ago
Beau went shopping at ABC Carpet. He saw some carpet he liked but could not make up his mind. The manager at ABC Carpet wrote do
Dmitry_Shevchenko [17]

Answer:

C) The court will apply the predominant-purpose test to determine whether the predominant purpose of the contract was the sale of goods in which case the UCC would apply.

Explanation:

From the case it is clear that the contract happens between Beau and the Manager of XYZ is of selling the carpet only. The service on the other hand, is not a department of UCC. The service contracts are department of common law whereas sales of goods law is applied to UCC or Uniform Commercial Code. So, except this option, all other options are false.

5 0
3 years ago
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