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Suppose that Russia decided to increase interest rates by %2.  Considering the inflation and interest differential between the US and Russia, what is likely to happen to real exchange rate in Russia? Explain with this formula iRuble− idollar = π  − π *

Suppose that Russia decided to increase interest rates by %2.  Considering the inflation and interest differential between the US and Russia, what is likely to happen to real exchange rate in Russia? Explain with this formula iRuble− idollar = π  − π *

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter19: International Finance And The Foreign Exchange Market
Section: Chapter Questions
Problem 2CQ
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Suppose that Russia decided to increase interest rates by %2. 

Considering the inflation and interest differential between the US and Russia, what is likely to happen to real exchange rate in Russia?

Explain with this formula iRuble− idollar = π  − π *

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