If Interest Rates on the Euro Are Consistently Below U

Multiple Choice

If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold:​

A) ​the value of the euro would often appreciate against the dollar.
B) ​the value of the euro would often depreciate against the dollar.
C) ​the value of the euro would remain constant most of the time.
D) ​the value of the euro would appreciate in some periods and depreciate in other periods, but on average have a zero rate of appreciation.