Description
Explain the Uncovered Interest Rate Parity (UIP)
condition under flexible and fixed exchange rates. In a country like the UK,
the monetary authorities have decided to continuously increase money supply for
some time now. In light of the UIP predictions, what would your forecast on the
UK interest rate and the UK economy as a whole be in 2014 in comparison with a
country like France, which is tied to the Euro? Carefully explain your answer.
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