If the Interest Rates in a Country Are Higher Relative

question 38

Multiple Choice

If the interest rates in a country are higher relative to interest rates in other countries,the short-term and long-term effects on the value of the currency of that country are:

• A)the same,since interest rates do not affect currency values.
• B)the same,since the central bank of the country will lower interest rates so that interest rates will not affect currency value.
• C)the value of the currency will increase as capital flows into the country to take advantage of the higher interest rates,but the value of the currency will decline when investors withdraw their funds from that country.
• D)the value of the currency will decrease as confidence in the country's currency suffers,but the value of the currency will eventually rise as confidence is restored.

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Definitions:

Cost Of Goods Sold

The costs directly related to the creation of products sold by a company, including expenses for raw materials and wages.

Worksheet

A paper or electronic tool used by accountants to gather information for adjusting entries and preparing financial statements.

Trial Balance

A list of accounts and their balances at a given time.

Terms 2/10 N/30

Terms 2/10 N/30 is a commercial credit term indicating that a buyer can deduct 2% of the invoice amount if payment is made within 10 days; otherwise, the full invoice amount is due in 30 days.