Which of the Following Explains the Interplay Between Exchange Rates

question 86

Multiple Choice

Which of the following explains the interplay between exchange rates and interest rates?

• A)If a government or central bank increases the interest rates,the domestic currency will appreciate.
• B)If a government or central bank decreases the interest rates,the domestic currency will appreciate.
• C)If a government or central bank increases the interest rates,the domestic currency will depreciate.
• D)Changing the level of interest rates has no effect on exchange rates.
• E)The effect of increases or decreases in the interest rate has unpredictable effects on the exchange rate.

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