Homework Answers
1) Solution: doesn't hold in short run and holds in the long run
Explanation: The data indicates that fisher effect appears in the long run, however it may not be present in the short run.
2) Solution: 2%
Working: Difference among the nominal interest rate in two nations would be directly proportional to the changes in the rate of the exchange for the currencies at any given time.
(6% - interest rate in the United States) = (8% - 4%)
Interest rate in the United States = 6% - 4% = 2%
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