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Examine whether the following statements are true or false. Give solid support of your reasoning using a relevant model or an example whichever is appropriate.
Examine whether the following statements are true or false. Give solid support of your reasoning using a relevant model or an example whichever is appropriate. a) If the unbiased forward rate hypothesis holds, a currency bought at a discount is expected to appreciate in value. (25 marks) b) If a country's capital account is in deficit, this country is running a trade deficit. (25 marks) c) The law of one price is equivalent to the purchase power parity. (25 marks) d) The carry trade profit opportunity arises due to the failure of uncovered interest parity condition. (25 marks)
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