Which of the following is a feature of the 'Interest Rate Parity' conditions?
A. They are independent of exchange rates
B. They apply only to real interest rates
C. They link interest rates and expected or forward exchange-rate changes across countries
D. They determine only domestic interest rates
Answer: Option C
Solution (By JKSSB Mock Tests)
Both covered and uncovered interest parity conditions relate the interest differential between two countries to the forward premium or the expected change in the exchange rate.
Explanation:
Tax salience measures how visible or noticeable a tax is to the agents who pay it; less salient taxes tend to produce smaller behavioural responses than more salient ones of equal magnitude.
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