Which of the Following Decreases the Real Interest Rate

question 176

Multiple Choice

Which of the following decreases the real interest rate?

• A) an increase in the nominal interest rate, holding the inflation rate constant
• B) an increase in both the nominal interest rate and the inflation rate by the same percentage points
• C) an increase in the inflation rate, holding the nominal interest rate constant
• D) a decrease in both the nominal interest rate and the inflation rate by the same percentage points

Understand the concept of unbiased forward rates and its significance in predicting future exchange rates.

Recognize the role of interest rate parity and uncovered interest rate parity in the foreign exchange market.

Evaluate the financial instruments used in foreign exchange, including swaps and options.

Analyze the effects of currency appreciation and depreciation on international trade and investment.

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