Why Do Higher Interest Rates Usually Lead to Currency Values

question 58

Multiple Choice

Why do higher interest rates usually lead to currency values increasing?

• A)Investors need to purchase the domestic currency to invest in that country and collect the higher interest rate.
• B)The higher interest rate leads to inflation,which increases the price of currency together with all other products.
• C)High interest rates encourage people to import more foreign goods,which will lead to more demand for the domestic currency.
• D)Countries usually increase interest rates to fight recessions,and the resulting growth of the economy increases demand for that country's currency.

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Definitions:

Marketing Channel

Pathways and intermediaries involved in the process of moving a product or service from the producer to the consumer.

Indirect

In a manner or by means not directly explicit; involving an intermediary or secondary channel.

Direct

The process or manner of communication or transaction that happens without any intermediaries.

Channel Conflict

A situation where channels in a distribution chain are in competition with each other or interfere, leading to reduced efficiency or sales.