1. Which of the following does NOT correctly complete the sentece? the Akron Effect refers to:
1. the reason that traders tend to hold on to losing investments longer than winning ones
2. the tendency to procrastinate in making painful decisions, hoping that the situation resloves itself.
3. the fiery crash of a zeppelin drigible
4. one reason why trying to play the stock market is for suckers.
2. Suppose the spot rate of exchange between Germany and the U.S. is euro 0.91/$, with an expected future spot rate of euro 0.95/$. Expected inflation in Germany is 2%, while U.S. expected inflation is 3%. In this situation, traders expect the __________ to appreciate and __________.
a. euro; purchasing power parity holds
b. euro; inflation in Germany to increase
c. euro; purchasing power parity is violated
d. dollar; purchasing power parity holds
e. dollar; purchasing power parity is violated