Determine the real interest rate

Assignment Help International Economics
Reference no: EM1375061

Assume that nominal interest rate on 3-month Treasury bills is 8 percent in the United States and 6 percent in the U.K., and the rate of inflation is 10% in the United States and 4% in the U.K.

[A] What is the real interest rate in each nation?

[B] In which direction would international investment flow in response to these real interest rates?

[C] What impact would these investment flows have on the dollar exchange value?

 

Reference no: EM1375061

Questions Cloud

Main costs of production for the goods or services : Determine the main costs of production for the goods or services your organization supplies? Breakdown the costs from the largest to the smallest.
Foreign income and repatriation of earnings : Describe both foreign income and repatriation of earnings using 3-examples that any worker can understand.
International trade activities : Choose a nation with international trade activities. Discuss the comparative advantage that would exist when selected nation has a margin of superiority.
Develop a framework for economic policy and issues : Suppose you are the Economic Advisor to the President of the U.S. Your task is to make a framework for economic policy and issues. During one of your briefing sessions in the White House,
Determine the real interest rate : Assume that nominal interest rate on 3-month Treasury bills is 8 percent in the United States and 6 percent in the U.K., and the rate of inflation is 10% in the United States and 4% in the U.K.
International bond issue to market : Discuss the process of starting a new international bond issue to market and what should a borrower consider before issuing dual currency bonds?
Explain how globalization affects the market economy : As your think tank expands its focus to international and global economic issues, Gabe wishes you to address the following condition and make a report on globalization
Oligopolies corporations of america dominate : Is the U.S. truly an economy that promotes competition and do you think about the markets where major oligopolies exist, for instance soft drinks or fast foods and automobile producing,
Appropriate coincident indicator : Discuss why are manufacturers’ new orders, nondefense capital goods, an appropriate leading indicator and explain w hy is the index of industrial production an appropriate coincident indicator?

Reviews

Write a Review

 

International Economics Questions & Answers

  Multiple choice questions on purchasing power parity

Smith identify that if the forward rate is lower than what interest rate parity indicates, the appropriate strategy would be to lend:

  Define black market

May rise or reduce in absolute value as one moves southeast along an indifference curve, depending upon whether the substitution or income effect is dominant.

  Ideals of justice and equality

The US was founded on ideals of justice and equality. The Declaration of Independence proclaimed that all men are developed equal, yet individuals such as African Americans and women were not afforded this equality.

  Determinants of demand for coffee

Coffee is a commodity that is developed, processed and shipped all over world. Research coffee on Internet. Please examine and try to find information on the market for coffee to support answers.

  Exchange rate between the thai bath and the us dollar

Following the reduce in the demand for the Baht, has the Baht appreciated or depreciated in relation to the United State dollar?

  Determine dollar price of the car

In September 1983, it took 245 Japanese yen to equal $1. More than twenty years later that exchange rate had fallen to 108 yen to $1.

  Private firms and government bureaus

Discuss how do government bureaus differ from private firms and explain why is there good reason to believe that bureaucrats will seek to supply more than efficient level of their output in any year?

  Calculate the percentage change in index

The customer price index is a fixed weight index. It compares the price of fixed bundle of goods in 1-year with the value of the same bundle of goods in some base year.

  Expansionary monetary policy

Discuss and explain why business and consumer expectations about the economy are more important when the Fed uses expansionary monetary policy then contractionary monetary policy.

  Application of the theory of the second best to economics

"The theory of the second best leaves welfare economists 'high and dry' since not only does it abolish the established objectives of first-best situations,

  Harmonization of accounting standards across countries

Determine the role would technology play if there was a move to harmonization of accounting standards across countries? Explain your reasoning.

  Impact of exchange rate on exports

Suppose that a country's real growth is 2% a year, while its real deficit is rising 5% per year. Can the country continue to afford such deficit indefinitely?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd