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What effects do relative inflation rates have on relative interest rates?
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What effects do relative inflation rates have on relative interest rates? |
Explanation & Answer

Explanation
Interest rates largely depend on inflation. To bring inflation down, governments will reduce the money supply by increasing the real interest rates. So a high relative inflation rate means high relative interest rates,and a low relative inflation means low relative interest rates.
Verified Answer
High domestic inflation means high domestic interest rate; low domestic inflation means low domestic interest rates.
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