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Assume that the approximate Fisher Equation holds for domestic and foreign countries. If real returns are equalized between countries by arbitrage, then the difference between

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Assume that the approximate Fisher Equation holds for domestic and foreign countries. If real returns are equalized between countries by arbitrage, then the difference between inflation differential between interest rates of any two countries is: Constant over time. O Equal to the change in exchange rate between their two currencies. O Equal to their inflation differential. Equal to their forward differential O Equal to their income differential

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