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International fisher effect quiz

Quiz by Jamal Haider Naqvi

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10 questions
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  • Q1
    What is the International Fisher Effect (IFE)?
    An international agreement on fishing regulations.
    A theory that suggests changes in exchange rates between currencies are determined by the difference in nominal interest rates between the countries.
    A theory that predicts fish populations in international waters.
    A technique used to increase fish catch in international waters.
  • Q2
    What is the purpose of the International Fisher Effect (IFE)?
    To promote the conservation of fish populations worldwide.
    To standardize fish measurement units for international trade.
    To regulate international fishing practices.
    To explain the relationship between interest rates and exchange rates between countries.
  • Q3

    There is much evidence to suggest that Japanese investors invest in U.S. Treasury securities when U.S. interest rates are higher than Japanese interest rates. These investors most likely believe in the international Fisher effect.

    True or False
  • Q4

    The IFE theory suggests that foreign currencies with relatively high interest rates will appreciate because the high nominal interest rates reflect expected inflation

    True or False
  • Q5

    If theinternational Fisher effect (IFE) holds, the local investors are expected toearn the same return from investing internationally as they would frominvesting in their local markets.

    True or False
  • Q6

    Which of the following theories suggests the percentage change in spot exchange rate of a currency should be equal to the interest rate differential between two countries?

    international Fisher effect(IFE).

    purchasing power parity (PPP).

    Interest rate parity (IRP).

  • Q7

    Which of the following theories suggests that the percentage difference between the forward rate and the spot rate depends on the interest rate differential between two countries?

    interest rate parity (IRP).

    purchasing power parity(PPP).

    international Fisher effect(IFE).

  • Q8

    If nominal British interest rates are 3% and nominal U.S. interest rates are 6%, then the British pound (£)is expected to ____ by about ____%, according to the international Fisher effect (IFE).

    depreciate; 2.9

    appreciate; 1.0

    appreciate; 2.9

  • Q9

    The interest rate in the U.K. is 7%, while the interest rate in the U.S. is 5%. The spot rate for the British pound is $1.50. According to the international Fisher effect (IFE), the British pound should adjust to a new level of




  • Q10

    The international Fisher effect (IFE) suggests that a home currency will depreciate if the current home interest rate exceeds the current foreign interest rate.

    True or False

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