When One Country Has Higher Nominal Interest Rates Than Another

question 11

Multiple Choice

When one country has higher nominal interest rates than another country,the high-interest-rate currency is expected to ________ relative to the low-interest-rate currency.

• A)depreciate
• B)appreciate
• C)stay constant
• D)None of the above

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Definitions:

Overriding Plate

The tectonic plate that sits above another plate at a convergent boundary, often responsible for mountain building and volcanic activity.

Ocean-Continent Convergent Boundary

A plate-tectonic boundary where an oceanic plate converges with a continental plate, generally expressed by subduction of the oceanic plate beneath the continent.

Flexing

The act of bending or tensing a material or muscle, often referring to the way earth's crust might bend under certain geological forces.

Thinning of the Lithosphere

The reduction in thickness of the lithosphere, often occurring in response to tectonic processes such as stretching and rifting.