In which direction would international investment flow in, Ask an Expert

Economics

Suppose that the nominal interest rate on three months Treasury bills is 8 percent in the United States and 6 percent in the United Kingdom, and the rate of inflation is 10 percent in the United States and 4 percent in the United Kingdom.

a. What is the real interest rate in each nation?
b. In which direction would international investment flow in response to these real interest rates?
c. What impact would these investment flows have on the dollar's exchange value?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M939287

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