According to the international Fisher effect, if investors in all countries require the same real rate of return, the differential in nominal interest rates between any two countries:

Question

Quizplus · Accepted Answer

The international Fisher effect suggests that the differential in nominal interest rates between any two countries is due to their inflation differentials. This means that if investors in all countries require the same real rate of return, then any difference in nominal interest rates must reflect the differences in expected inflation rates between the two countries. Therefore, option B is correct. Options A, C, and D are incorrect as they do not reflect the relationship between nominal interest rates and inflation differentials as suggested by the international Fisher effect. Option E is incorrect as only option C is true, but option D is not.

According to the International Fisher Effect, If Investors in All