0/1 pts Incorrect Question 14 Which of the following statement is FALSE? Other country characteristics besides inflation (e.g., income levels, government controls) can affect exchange rate movements. Even if the expected inflation derived from the Fisher effect properly reflects the actual inflation rate over the period, relying solely on inflation to forecast the future exchange rate is subject to errors. The international Fisher effect (IFE) theory suggests that currencies with high interest rates will have high expected inflation (due to the Fisher effect) and the relatively high inflation will cause the currencies to depreciate (due to the relative PPP effect). The international Fisher effect (IFE) theory suggests that foreign investors who attempt to capitalize on relatively high U.S. interest rates will be adversely affected by USD appreciation. The Fisher effect suggests that nominal interest rates of two countries differ because of the difference in expected inflation between the two countries. 0/1 pts Incorrect Question 9 Currency carry trade involves - a currency that has a higher rate of interest and funding the trade by in a currency with a low rate of interest, without any hedging. buying: tending selling; lending buying: borrowing selling: borrowing