Assume That the Interest Parity Condition Holds and That Both

question 27

Multiple Choice

Assume that the interest parity condition holds and that both the expected exchange rate and foreign interest rate are constant.Given this information,a reduction in the domestic interest rate will cause

• A)a reduction in the exchange rate expected in the future.
• B)a reduction in the current exchange rate.
• C)greater depreciation of the domestic currency expected in the future.
• D)all of the above
• E) none of the above