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If interest rates in the Euro-area are 2% and inflation is 2% whilst in the USA interest rates are 1% and inflation is 1% then
If interest rates in the Euro-area are 2% and inflation is 2% whilst in the USA interest rates are 1% and inflation is 1% then uncovered interest rate parity predicts that Select one: O 0 a. the euro should appreciate against the dollar in real terms by 1% b. the dollar should appreciate against the euro in real terms by 2% c. The euro should remain unchanged against the dollar in real terms d. the dollar should appreciate against the euro in real terms by 1% e. the euro should appreciate against the dollar in real terms by 2%
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