Suppose that in the United States and the United Kingdom the real ...

[jazziefee]

Suppose that in the United States and the United Kingdom the real rate of interest is 1 percent and constant. In this case, the nominal interest rates in both countries
 
  A) are equal.
  B) differ solely by the expected future spot rate differential.
  C) differ solely by the expected inflation differential.
  D) differ solely by the forward rate differential.

Question 2

Countries with the
 
  A) biggest deflations and output contractions are countries which were never on the gold standard until 1936.
  B) biggest inflations and output contractions are countries which were on the gold standard until 1936.
  C) lowest deflations and output contractions are countries which were on the gold standard until 1936.
  D) biggest deflations and output increases are countries which were on the gold standard until 1936.
  E) biggest deflations and output contractions are countries which stayed on the gold standard until 1936.

[wergv]

Answer to Question 1

C

Answer to Question 2

E