Assume That U

question 37

Multiple Choice

Assume that U.S. interest rates are 6 percent, while British interest rates are 7 percent. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of:​

• A)appreciation of the pound's value over the next year.
• B)depreciation of the pound's value over the next year.
• C)no change in the pound's value over the next year.
• D)not enough information to answer this question.

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Definitions:

Null Hypothesis

The null hypothesis is a statement suggesting that no statistical significance exists in a set of given observations, representing a default position that there is no association between two measured phenomena.

Type II Error

The error made when a false null hypothesis is not rejected, missing the detection of a real effect.

Type I Error

The mistake of rejecting the null hypothesis when it is actually true.

Null Hypothesis

The default hypothesis that there is no effect or no difference, and any observed effect is due to sampling variability.