This theory states that a country with a relatively lower nominal interest rate will have its currency appreciate relative to a country with a relatively higher interest rate.

Question

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This theory is known as the International Fisher Effect. It suggests that currencies with higher interest rates will eventually experience depreciation as more investors seek investment opportunities in countries with higher returns. Conversely, countries with lower interest rates will experience appreciation in their currency value as investors seek stability in lower-risk countries.

This Theory States That a Country with a Relatively Lower