1. Under uncovered interest parity (UIP), all exchange rate risk has been covered by a forward contract.

a. false

b true

2. Covered interest parity (CIP) is a no-arbitrage condition where investors don't cover their risk.

a. false

b. true

3. Since policy makers have no direct control over theprice level, they must final a nominal variable (or anchor) related to inflation that is under their control to achieve price stability.

a. false

b. true

4. An economy's long run nominal interest rate is the long run world real interest rate plus the economy's expected long run inflation rate.

a. false

b. true