Real U.S.interest rates move above Japanese interest rates.If you believe that Japanese interest rates won't move and you believe that interest rate parity will hold then ____________.

Question

Quizplus · Accepted Answer

If U.S. interest rates are higher than Japanese interest rates, investors will likely move their money to the U.S. to take advantage of the higher returns. This will increase the demand for dollars, causing the dollar to appreciate against the yen. So, the dollar per yen exchange rate should rise.

Real USInterest Rates Move Above Japanese Interest Rates