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Chapter 18: Q.11 (page 495)

If nominal interest rates in America rise but real interest rates fall, predict what will happen to the U.S. dollar exchange rate.

Short Answer

Expert verified

The dollar will depreciate.

Step by step solution

01

Step 1.GIven information

Expansion rate = ostensible financing costs - genuine loan fees in the event that ostensible financing costs in America rise yet genuine loan fees fall, expansion increments. The worth of dollar devalues or U.S. swapping scale goes down.

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