Under conditions of interest rate parity (IRP), a country with a relatively _______ higher nominal interest rate will have its currency _______ relative to a country with a relatively _______ nominal interest rate.

Question

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Under interest rate parity, a country with a higher nominal interest rate will see its currency depreciate because investors will expect the currency to weaken to offset the higher returns from the interest rate.

Under Conditions of Interest Rate Parity (IRP), a Country with a Relatively