2. If the annual returns on us dollar is 4% and on euro is 2% too. Furthermore, if the current exchange rate is 16=1.25$, and expected exchange rate in a year is 1$=0.786, then: a. Investors would prefer to invest in U.S. dollar. b. Investors would prefer to invest in euro. c. Investors are indifferent between investing in U.S. dollar or euro. d. This is an example on interest rate parity. 3. A permanent supply shock affects output and inflation both in the short and long run. a. True b. False 4. Okun's law represents a positive relationship between unemployment and output. a.True b. False 5. Currency depreciation leads to an increase in net exports. a. True b. False 6. The interest rate has an impact on the consumption versus saving decisions. b. True b. False