17. The difference between the nominal interest rate and the actual inflation rate is often called the ex post real interest rate (as opposed to the ex ante, or expected real interest rate). Figure 15-2 shows that between 1976 and 1980, the ex post real interest rate in Switzerland was usually positive while that in the United States was usually negative. Assume that people were able to forecast inflation accurately in both countries during these years. What would you guess about the dollar's strength against the Swiss franc in the foreign exchange market between 1976 and 1980?

What do you think happened to the dollar/Swiss franc exchange rate in 1981-1982?

Check your answer by looking up the history of the exchange rate. (See, for example, the International Monetary Fund's publication, International Financial Statistics.)