Q. (a)Assume the interest rate parity condition holds(all investors have the same expectations). If the...
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Q. (a)Assume the interest rate parity condition holds(all investors have the same expectations). If the foreign currency is expected to depreciate (relative to the domestic currency) by 15% over the next year, would domestic investors be willing to purchase foreign bonds today? Explain using an equation with numbers. (b) Explain whythe analysis of net exports needs to be done in an intertemporal (or dynamic) model. Write out one or more equations for net exports.Explain.
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