A) If the international fisher effect (IFE) holds and euro interest rates are persistently higher than u.s. interest rates, the value of the euro will frequently rise versus the dollar.
According to the International Fisher Effect (IFE), the variation in nominal interest rates between any two nations is directly correlated with changes in the exchange rates between those nations' currencies at any given moment. The concept was created by American economist Irving Fisher.
The International Fisher Effect, which is based on present and expected nominal interest rates, is employed to forecast the present and upcoming changes in currency rates. The IFE differs from other techniques that use pure inflation to attempt to forecast and comprehend changes in the exchange rate.
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