Combining the home money market and the uncovered interest parity relationship, we can see how changes in variables determine:
A) real GDP.
B) the exchange rate.
C) the price level.
D) the quantity of money.

Question

Quizplus · Accepted Answer

The uncovered interest parity relationship shows how changes in interest rates in different countries affect the exchange rate between those countries. Combining this with the home money market, which determines the domestic interest rate, allows us to see how changes in both domestic and foreign interest rates can impact the exchange rate.

Combining the Home Money Market and the Uncovered Interest Parity