The Fisher Equation Holds That

question 26

Multiple Choice

The Fisher equation holds that:

• A)relative interest rates determine the relativity between the forward exchange rate and the spot exchange rate.
• B)for any given interest rate,one currency will be set by the market such that it covers expected inflation and provides a real return.
• C)the expected change in the exchange rate is due to differences in expected inflation rates in respective countries.
• D)for any given currency,the nominal interest rate will be set by the market such that it covers expected inflation and provides a real return.

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Definitions:

Free Trade

An economic policy allowing imports and exports to occur without government intervention such as tariffs, quotas, or other restrictions.

Sugar

A sweet-flavored substance sourced primarily from sugarcane and sugar beets, used widely as a sweetener in food and beverages.

Government Interference

Actions taken by the government to influence the economy or specific industries, which can include regulations, taxes, or subsidies.

Country

A distinct territorial body or political entity recognized as an independent nation.