_____ states that for any two countries,the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

Question

Quizplus · Accepted Answer

The statement describes the International Fisher Effect, which suggests a correlation between spot exchange rates and nominal interest rates between two countries. The Fisher Effect (A) applies to the relationship between nominal interest rates and inflation rates in a single country. The efficient market theory (C) and inefficient market theory (D) do not relate to exchange rates and nominal interest rates.

_____ States That for Any Two Countries,the Spot Exchange Rate