According to the International Fisher Effect, the Forecast Change in the Spot

question 19

Multiple Choice

According to the International Fisher Effect, the forecast change in the spot rate between two countries is equal to:

• A) the current spot rate multiplied by the ratio of the inflation rates in the respective countries.
• B) but the opposite sign to the difference between nominal interest rates.
• C) but the opposite sign to the difference between inflation rates.
• D) but the opposite sign to the difference between real interest rates.

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Definitions:

Explanatory Variables

Variables in a statistical model that are used to explain changes or differences in a response variable.

T-Statistic

A value used in hypothesis testing, calculated as the difference between an observed sample mean and the population mean divided by the standard error of the mean.

Coefficient on Education

A statistical measure in regression that represents the change in the dependent variable resulting from a one-unit change in the level of education, all else being equal.

Significantly Different

A term used in statistics to indicate that the observed differences between groups or variables are too large to be attributed to chance alone, according to a predefined level of significance.