Consider a floating exchange rate system. Assume that Uncovered interest rate parity holds. Choose correct statement(s). At least one is correct.

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Answer

Increase in the future expected nominal exchange rate of domestic currency (agents expect that nominal exchange rate of domestic currency depreciates in future) ceteris paribus causes nominal exchange rate of domestic currency to appreciate.

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Increase in domestic interest rate ceteris paribus causes   domestic currency nominal exchange rate to depreciate.

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Increase in domestic interest rate ceteris paribus causes the nominal exchange rate of domestic currency to appreciate.

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Increase in foreign interest rate ceteris paribus causes the nominal exchange rate of domestic currency to depreciate.

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Consider a floating exchange rate system. Assume that Uncovered interest rate ...

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