The Reserve Bank of India Raises Interest Rates to 5.50%

Answer the following questions to check your understanding of the story.

What is the U.S. interest rate differential?

a) The foreign interest rate minus the U.S. interest rate

b) The U.S interest rate minus the foreign interest rate

c) The change in the U.S. interest rate minus the change in the foreign interest rate

d) The U.S. interest rate divided by the foreign interest rate

What is interest rate parity?

Interest rate parity is a situation in which __________.

a) value of money is equal in two countries

b) interest rates in two countries are equal

c) interest rates are equal but only in countries with fixed exchange rates

d) interest rates in two currencies are equal when exchange rate changes are taken into account

How is interest rate parity achieved?

Interest rate parity is achieved by __________.

a) arbitrage

b) central bank intervention

c) exchange rate volatility

d) a constant real exchange rate

If the interest on a one-year deposit in Indian rupees is 5% and on a U.S. dollar deposit is 4%, what is expected to happen to the U.S. dollar/Indian rupee exchange rate?

The Indian rupee is expected to ___________ against the U.S. dollar.

a) remain unchanged

b) appreciate by 1 percent

c) depreciate by 1 percent

d) depreciate by 4 percent

The Reserve Bank of India Raises Interest Rates to 5.50%

Like this:

Leave a Reply Cancel reply

Share this:

Like this:

Leave a Reply Cancel reply