Q.

If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold:

A. the value of the euro would often appreciate against the dollar.
B. the value of the euro would often depreciate against the dollar.
C. the value of the euro would remain constant most of the time.
D. the value of the euro would appreciate in some periods and depreciate in other periods, but on average have a zero rate of appreciation.
Answer» A. the value of the euro would often appreciate against the dollar.
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