Q678
Differences in nominal interest rates are removed in exchange rate is
A.
fisher effect
AnswerB.
Leontief paradox.
C.
combined equilibrium theory.
D.
purchasing power parity
Answer: Option A
Solution
Answer: Option A
Solution:
Differences in nominal interest rates are removed in exchange rate is fisher effect. The Fisher Effect is an economic theory created by economist Irving Fisher that describes the relationship between inflation and both real and nominal interest rates. The Fisher Effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.