What is an Arbitrage?
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Why do economists often assume that there are no possibilities for arbitrage? What is the relationship between arbitrage and the asset-pricing formula?
Define arbitrage pricing.
4. Government Policy in an Open Economy
A. Describe arbitrage and explain what is necessary for arbitrage to work. (3 points)
B. Explain the twin deficits effect. (3 points)
C. Who would be harmed and who would benefit if the United States imposed a high tariff on all imported toys? Explain. (3 points)