Question

Under PPP (and by the Fisher Effect), all else equal Group of answer choices a rise in a country's expected inflation rate will eventually cause a less than proportional rise in the interest rate that deposits of its currency offer to accommodate the rise in expected inflation. a rise in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer. a fall in a country's expected inflation rate will eventually cause an inversely proportional rise in the interest rate that deposits of its currency offer to accommodate the rise in expected inflation. a rise in a country's expected inflation rate will eventually cause a more-than proportional rise in the interest rate that deposits of its currency offer in order to accommodate for the higher inflation. a fall in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer.

Answer 1

Answer:

a rise in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer.

Explanation:

Inflation can be defined as the persistent general rise in the price of goods and services in an economy at a specific period of time.

Generally, inflation usually causes the value of money to fall and as a result, it imposes more cost on an economy.

When this persistent rise in the price of goods and services in an economy becomes rapid, excessive, unbearable and out of control over a period of time, it is generally referred to as hyperinflation

Under PPP i.e purchasing power parity (and by the Fisher Effect), all else equal a rise in a country's expected inflation rate will eventually cause an equal rise in the interest rate that deposits of its currency offer.