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Assume that the real interest rate is 2% in the U.S. and 1% in Canada. The annual nominal interest rate is 3.7% in the U.S.
Assume that the real interest rate is 2% in the U.S. and 1% in Canada. The annual nominal interest rate is 3.7% in the U.S. and 4.9% in Canada.
Part 1
What is the approximate expected percentage change in the exchange rate (measured in U.S. dollars per Canadian dollar) according to the Fisher effect and purchasing power parity?
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