Answer to Question #219427 in Microeconomics for darily

Question

1.    If a nation's interest rates are relatively low compared to those of other countries, then the exchange value of its currency will tend to

a.     appreciate under a system of fixed exchange rates.

b.    remain constant.

c.     depreciate under a system of floating exchange rates.

d.    appreciate under a system of floating exchange rates. 

Answer 1

Correct answer is c.  depreciate under a system of floating exchange rates.