Question
US interest rate is 2% and Mexico interest rate is 5%. Holding everything else equal, which one of the following statements is true about exchange
US interest rate is 2% and Mexico interest rate is 5%. Holding everything else equal, which one of the following statements is true about exchange rate between Mexican Peso and US Dollar?
Question 5 options:
| Peso will depreciate against Dollar in the long run according to Interest Rate Parity (IRP). |
| Exchange rate will stay the same in the long run according to Purchasing Power Parity (PPP). |
| Peso will appreciate against Dollar in the long run according to Interest Rate Parity (IRP). |
| Peso will appreciate against Dollar in the long run according to Purchasing Power Parity (PPP). |
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