1-2 pages

You are asked to help put together a training program describing the effects of exchange rates to training participants at Axetem. Your training material is to address the following:

Explain the Fisher effect and its mechanics by walking the trainees through a step-by-step explanation in the following hypothetical situation:

  • If the real interest rate is 5%, the U.S. inflation rate is at 3%, and the inflation rate of the euro area (the countries that use the euro) is at 4%, what are the nominal interest rates for both the United States and the euro area? Interpret the calculation for your trainees.
  • What are at least 3 implications of exchange rate fluctuations for Axetem as they relate to marketing and production decisions?
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