Question

​ Assume that U.S. and British investors require a real return of 2 percent. If the nominal U.S. interest rate is 15 percent, and the nominal British rate is 13 percent, then according to the IFE, the British inflation rate is expected to be about ____ the U.S. inflation rate, and the British pound is expected

Answer 1

2 percentage points below; appreciate by about 2%.

Step-by-step explanation:

The nominal Unites States interest rate is 15 percent and nominal British rate is 13 percent.So United states is earning more revenue through the interest hence the inflation rate of the U.S 2 percentage above than the British's inflation rate.Hence the british pound is appreciated by 2%.