Assume a System of Floating Exchange Rates and High Capital

question 8

Multiple Choice

Assume a system of floating exchange rates and high capital mobility.In response to relatively high interest rates abroad, suppose domestic investors place their funds in foreign capital markets.Other things equal, the result would be

• A) a depreciation of the domestic currency and a rise in net exports.
• B) a depreciation of the domestic currency and a fall in net exports.
• C) an appreciation of the domestic currency and a rise in net exports.
• D) an appreciation of the domestic currency and a fall in net exports.

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