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Inflation rates between the currencies

Problem:

Assume that the U.S and the Euro nominal interest rate are equal. Subsequently, the U.S. nominal rate decreases while the Euro nominal interest rate remains stable.

According to the Fisher Effect:

1. Explain what this implies about the inflation rates between the currencies.

2. Explain also what should happen between the two currencies exchange rate.

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Finance Basics: Inflation rates between the currencies

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