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Exchange rates

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Question 5

To combat persistent domestic inflationary pressures, the Central Bank of a nation increases its main policy interest rate by 3.5%. Over the same period, the central banks of its key trading partners increase their interest rates by an average of 1.2%. What is the most likely direct impact of these interest rate decisions on this nation's economy?

A

Hot money will flow in, causing the exchange rate to appreciate

B

Hot money will flow in, causing the exchange rate to depreciate

C

Hot money will flow out, causing the exchange rate to appreciate

D

Hot money will flow out, causing the exchange rate to depreciate

Markscheme

Exchange rates Questions

  1. A Level
  2. /Economics
  3. /Exchange rates

30 exam-style questions on OCR A Level Economics Exchange rates. Each one has a worked solution and a mark scheme showing where the marks go.

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