How do changes in interest rates affect exchange rates?
What will be an ideal response?
Changes in interest rates affect the value of a country's currency vis-à-vis other currencies. When the interest rate in an economy increases, investors want to invest in the economy. This increases the demand for the domestic currency causing it to appreciate against other currencies in the foreign exchange market. On the other hand, when interest rate decreases in an economy, the country's currency depreciates.
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Among the countries that use the euro, the real exchange rate ________ and the nominal exchange rate ________
A) is fixed; is fixed B) is fixed; can change C) can change; is fixed D) can change; can change
A good time for an American to hold German stocks, ceteris paribus, is when the
A. Euro is stable compared to the U.S. dollar. B. The return in the German stock market has no relationship to the value of the dollar compared to the euro. C. U.S. dollar appreciates in value compared to the euro. D. U.S. dollar depreciates in value compared to the euro.
Oligopolistic behavior includes
A. Independent pricing. B. Tacit collusion. C. High concentration ratios. D. High barriers to entry.
The long boom occurred in the
A. 1940s and 1950s. B. 1980s and 1990s. C. 1920s and 1930s. D. 1960s and 1970s.