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Real interest rates in the U.K. are 6%, while real interest rates in the U.S. are 5%. The spot rate for the British pound ()
Real interest rates in the U.K. are 6%, while real interest rates in the U.S. are 5%. The spot rate for the British pound () is $1.50. According to the international Fisher effect (IFE), the British pound should adjust to a new level of
| a.$1.49. |
| b. $1.51. |
| c. $1.44. |
| d. The international Fisher effect suggests none of these choices are correct. |
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