6. Inflation, interest rates, and exchange rates Relatrve inflation rates affect interent raties, exchange rates, the averall econornic health of a country, and the operations and peolitability of moulinational compories: Consader the following statement: Countries with lower intlation rates will have lower interest rates. Bused on vour untierstanding of the relationiship becween relative inflation rates and exchange rates, identily ahnether the ptecesting statement is valud of invalit. The statement is valid, because the nominal miterest rate is the suen of the redi interest rate phis inilation, so lower indlation rates modld result in lower interest rates The statement is invaled, because the nominal interest rate is independent of the inficton rate. from currency apereciation