What Are the Determinants of the Nominal Interest Rate in the Medium

question 4

Essay

What are the determinants of the nominal interest rate in the medium run? Based on your answer,to what extent can monetary policy affect the nominal interest rate in the medium run? Briefly explain.And finally,to what extent can fiscal policy affect the nominal interest rate in the medium run? Briefly explain.

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Definitions:

Foreign Currencies

Different countries' monetary units, which are exchanged in the foreign exchange market.

British Pound

The currency of the United Kingdom, used in Great Britain and Northern Ireland.

Uncovered Interest Parity

An economic theory that states the difference in interest rates between two countries equals the expected change in exchange rates between those countries' currencies.

Exchange Rate

The price of one country's currency expressed in another country's currency.