​The International Fisher Effect (IFE) Suggests That the Foreign Currency

question 55

Multiple Choice

​The international Fisher effect (IFE) suggests that the foreign currency will appreciate when:

• A) ​the current home nominal interest rate exceeds the current foreign nominal interest rate.
• B) ​the current home real interest rate exceeds the current foreign real interest rate.
• C) ​the current home inflation rate exceeds the current foreign nominal interest rate.
• D) ​the current foreign inflation rate exceeds the current home inflation rate.

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Definitions:

Ratio

A ratio is a mathematical expression that compares two or more numbers, showing how much larger one quantity is than another.

Coefficient of Determination

This statistic measures the proportion of the variance in the dependent variable that is predictable from the independent variable(s) in a regression model, often represented as R².

Total Variation

The sum of squared differences between observed values and their overall mean in a dataset.

Predictor Variable

A variable used in statistical modeling to predict or explain changes in the dependent variable.