Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 38 - The Balance of Payments, Exchange Rates, and Trade Deficits - Questions - Page 799: 8b

Answer

Agree

Work Step by Step

Higher interest rates attract foreign capital seeking better returns. Investors must buy the local currency to invest, increasing demand and pushing up its value. This is a classic driver of currency appreciation in global markets. So I agree with the statement “A nation whose interest rate is rising more rapidly than interest rates in other nations can expect the international value of its currency to appreciate.”
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