Which of the Following Explains the Interplay Between Exchange Rates

question 70

Multiple Choice

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

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