If Interest Rates on the Euro Are Consistently Below U

question 48

Multiple Choice

If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold:​

• A)the value of the euro would oFten appreciate against the dollar.
• B)the value of the euro would oFten depreciate against the dollar.
• C)the value of the euro would remain constant most of the time.
• D)the value of the euro would appreciate in some periods and depreciate in other periods, but on average have a zero rate of appreciation.