In late December 1990, one-year German Treasury bills yielded 9.1%, whereas one-year U.S. Treasury bills yielded 6.9%.
Question:
a. Are these inflation and interest rates consistent with the Fisher effect? Explain.
b. What might explain this difference in interest rates between the United States and Germany?
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a Not if one assumes that future inflation will equal past inflation In that case th...View the full answer
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