Author Question: An increase in the domestic one-year interest rate expected to occur in, say, two years will, all ... (Read 21 times)

geoffrey · **on:** Jun 30, 2018

An increase in the domestic one-year interest rate expected to occur in, say, two years will, all else fixed, have which of the following effects in a flexible exchange rate regime?

A) The real exchange rate will increase with no change in the nominal exchange rate.
B) The nominal exchange rate will increase with no change in the real exchange rate.
C) Both the real and nominal exchange rate will increase.
D) No change in either the nominal or real exchange rate.

Question 2

Which of the following represents the change in the capital stock?

A) consumption minus depreciation
B) output minus depreciation
C) investment minus saving
D) investment minus depreciation