What concept implies that the real interest rate in Canada should equal that in the rest of the world?
A) Fisher effect
B) Ricardian equivalence
C) purchasing-power parity
D) interest rate parity

Question

Quizplus · Accepted Answer

Interest rate parity states that the real interest rate in a country should equal the real interest rate in another country adjusted for expected changes in exchange rates. This maintains equilibrium in the foreign exchange market.

What Concept Implies That the Real Interest Rate in Canada