Consider a Closed Open Economy with Fixed Exchange Rate. The interest rate is initially at the...
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Consider a Closed Open Economy with Fixed Exchange Rate. The interest rate is initially at the world interest rate. There is a devaluation. Assume investors do not expect any further devaluation or revaluation. What happens to the interest rate? a. Increase b. Decrease c. Unchanged d. Indeterminate Consider a Closed Open Economy with Fixed Exchange Rate. The interest rate is initially at the world interest rate. There is a devaluation. Assume investors do not expect any further devaluation or revaluation. What happens to the interest rate? a. Increase b. Decrease c. Unchanged d. Indeterminate
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b Decrease When a devaluation occurs it makes domestic assets less attractive to fore... View the full answer
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