Question: CHOOSE THE RIGHT ANSWER FROM THE HIGHLIGHTED BELOW: 1a.According to real interest parity, the domestic expected real interest rate equals the foreign expected real interest

CHOOSE THE RIGHT ANSWER FROM THE HIGHLIGHTED BELOW:

1a.According to real interest parity,

the domestic expected real interest rate equals the foreign expected real interest rate.

the domestic real interest rate equals the foreign real interest rate.

the domestic expected real interest rate minus the foreign expected real interest rate equals the expected future spot exchange rate divided by the current spot exchange rate, where the exchange rate is the price of foreign currency in terms of domestic currency.

the domestic expected real interest rate minus the foreign expected real interest rate equals the expected rate of depreciation of the domestic currency against the foreign currency.

the domestic expected real interest rate divided by the foreign expected real interest rate equals the expected future spot exchange rate divided by the current spot exchange rate, where the exchange rate is the price of foreign currency in terms of domestic currency.

According to the monetary approach to the exchange rate, with nominal money supplies being constant in Sweden and the US, if Sweden's real money demand level increases by 4% and the US real money demand level increases by 6%, then

the Swedish krona should depreciate against the US dollar by less than 2% to take into account overshooting.

the Swedish krona should depreciate against the US dollar by greater than 2% to take into account overshooting.

the Swedish krona should depreciate against the US dollar by 2%.

the Swedish krona should appreciate against the US dollar by 2%.

the Swedish krona should appreciate against the US dollar by greater than 2% to take into account overshooting.

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