Assume a System of Floating Exchange Rates

question 42

Multiple Choice

Assume a system of floating exchange rates.In response to relatively high domestic interest rates,suppose that foreign investors place their funds in domestic capital markets.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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Definitions:

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