Fisher effect-u.s and euro inflation and currency rates

Reference no: EM1345309

Suppose that the U.S and Euro nominal interest rate are equal. Subsequently, the U.S. nominal rate decreases while Euro nominal interest rate remains stable.

According to Fisher Effect:

1. Describe what this implies about the inflation rates between the currencies.

2. Describe also what should take place between two currencies exchange rate.

Reference no: EM1345309

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