Under PPP (and by the Fisher Effect), all else equal A) a rise ...

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Under PPP (and by the Fisher Effect), all else equal
 
  A) a rise in a country's expected inflation rate will eventually cause a more-than proportional rise in the interest rate that deposits of its currency offer in order to accommodate for the higher inflation.
  B) a fall in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer.
  C) a rise in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer.
  D) a rise in a country's expected inflation rate will eventually cause a less than proportional rise in the interest rate that deposits of its currency offer to accommodate the rise in expected inflation.
  E) a fall in a country's expected inflation rate will eventually cause an inversely proportional rise in the interest rate that deposits of its currency offer to accommodate the rise in expected inflation.

Question 2

With perfect asset substitutability and capital mobility the domestic interest rate is equal to the foreign rate.
 
  Indicate whether the statement is true or false

[LegendaryAnswers]

Answer to Question 1

C

Answer to Question 2

TRUE

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