In a world with few impediments to capital mobility,the domestic interest rate equals the sum of the foreign interest rate and the expected depreciation of the domestic currency,a situation known as the

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The statement describes the interest parity condition, where capital can freely flow between countries and the domestic interest rate becomes equal to the sum of the foreign interest rate and the expected depreciation of the domestic currency. This condition ensures that there are no arbitrage opportunities between domestic and foreign investments, leading to a close alignment of interest rates across countries.

In a World with Few Impediments to Capital Mobility,the Domestic