need assistance with b and c (a) The interest rate in the UK is 8%. The inflation rate in the US is 3% and in the UK 5%. Use the Fisher effect to find the US interest rate. Answer 6% (b) The exchange rate of the British pound is 1.25. The price level in the US is 300. The real money demand in the UK is 3. Assume that the PPP holds. Find the nominal money supply in the UK. Answer: 720 (c) The US economy grows at a 2% interest rate. The US is growing its nominal money supply at 6% interest rate. In Europe, the inflation rate is 3%. Find the expected rate of appreciation of the euro. Answer:0.01
need assistance with b and c (a) The interest rate in the UK is 8%. The inflation rate in the US is 3% and in the UK 5%. Use the Fisher effect to find the US interest rate. Answer 6% (b) The exchange rate of the British pound is 1.25. The price level in the US is 300. The real money demand in the UK is 3. Assume that the PPP holds. Find the nominal money supply in the UK. Answer: 720 (c) The US economy grows at a 2% interest rate. The US is growing its nominal money supply at 6% interest rate. In Europe, the inflation rate is 3%. Find the expected rate of appreciation of the euro. Answer:0.01
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
need assistance with b and c
(a) The interest rate in the UK is 8%. The inflation rate in the US is 3% and in the UK 5%. Use the Fisher effect to find the US interest rate. Answer 6%
(b) The exchange rate of the British pound is 1.25. The
(c) The US economy grows at a 2% interest rate. The US is growing its nominal money supply at 6% interest rate. In Europe, the inflation rate is 3%. Find the expected rate of appreciation of the euro.
Answer:0.01
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