<u>Answer:</u>
According to the International fisher effect , for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.
<u>Explanation:</u>
- International fisher effect states that if there is difference in nominal rate in two countries then this might affect the exchange rate of the two countries.
- If any country has higher nominal interest then there is a higher chance of inflation which might result in depreciation in there currency.
- For example XYZ country has 8% nominal interest and another ABC country have 10%. If we look closely, country ABC will be more appreciable but the country with higher interest will have higher inflation rate.
- So, inflation depreciates the currency of country as compared with the country with low nominal interest.
Answer: D
Explanation: They need not to reply on domestic market for there business goals and opportunities, they need to be proactive in their business, explore new locations,carryout research in other foreign market and develop ideas that will improve their business since the opportunity in the domestic market reduces.
In other words, since the domestic market opportunities are decreasing, that have to spears their tentacles to foreign market for survival .so the best option that fits into the blank is "option D" proactive.
