Preference

Question: How might an increase in interest rates lead to fall in a country's exchange rate?

  1. a.
    It will produce a net inflow of short-term capital
  2. b.
    It will cause inflation to fall thereby improving the country's competitiveness
  3. c.
    It will depress economic activity leading to a fall in imports
  4. d.
    It will harm the economy's growth prospects leading to a decrease in inward investment
  5. e.
    None of them
Answer: d
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