According to the Interest Parity Condition,if the Domestic Interest Rate

question 9

Multiple Choice

According to the interest parity condition,if the domestic interest rate is 12 percent and the foreign interest rate is 10 percent,then the expected ________ of the foreign currency must be ________ percent.

• A)appreciation;4
• B)appreciation;2
• C)depreciation;2
• D)depreciation;4

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Definitions:

U.S. Products

Goods and services that are produced, manufactured, or assembled within the United States.

Long-term Capital Inflows

The movement of capital into a country over an extended period, often used for investment in major projects or to boost foreign reserves.

Foreign Travel

The act of traveling outside of one's home country for leisure, business, or other purposes.

U.S. Dollars

The official currency of the United States, also widely used as a global reserve currency.