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Macroeconomics 11th Edition by Michael Parkin
Edition 11ISBN: 9780133423884Macroeconomics 11th Edition by Michael Parkin
Edition 11ISBN: 9780133423884 Exercise 4
Exchange Rate Fluctuations
Use the following information to work Problem.
Brazil's Overvalued Real
The Brazilian real has appreciated 33 percent against the U.S. dollar and has pushed up the price of a Big Mac in Sao Paulo to $4.60, higher than the New York price of $3.99. Despite Brazil's interest rate being at 8.75 percent a year compared to the U.S. interest rate at near zero, foreign funds flowing into Brazil surged in October.
Does interest rate parity holdIf not, why notWill the Brazilian real appreciate further or depreciate against the U.S. dollar if the Fed raises the interest rate while the Brazilian interest rate remains at 8.75 percent a year?
Use the following information to work Problem.
Brazil's Overvalued Real
The Brazilian real has appreciated 33 percent against the U.S. dollar and has pushed up the price of a Big Mac in Sao Paulo to $4.60, higher than the New York price of $3.99. Despite Brazil's interest rate being at 8.75 percent a year compared to the U.S. interest rate at near zero, foreign funds flowing into Brazil surged in October.
Does interest rate parity holdIf not, why notWill the Brazilian real appreciate further or depreciate against the U.S. dollar if the Fed raises the interest rate while the Brazilian interest rate remains at 8.75 percent a year?
Explanation
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The real exchange rate between exchange ...
Macroeconomics 11th Edition by Michael Parkin
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