Suppose the nominal interest rates are 5% in the United States and 2% in the United Kingdom

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Suppose the nominal interest rates are 5% in the United States and 2% in the United Kingdom this year. The inflation rate is 1.5% in the U.S. and 2% in the U.K. next year. Calculate the real interest rates in both countries. Which country is likely to attract more investment from abroad, holding everything else constant?

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Financial Institutions, Markets and Money

ISBN: 978-1119330363

12th edition

Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias

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