[Answer] By what mechanism do interest rates affect currency values? (C)

Answer: a)High interest rates slow an economy and make it less attractive to investorsb)Changes in interest rates directly influence the value at which a currency is peggedc)Global investors are attracted by higher bond yields in high interest rate countriesd)High interest rates make the currency safer
By what mechanism do interest rates affect currency values? (C)

An interest rate is the amount of interest due per period as a proportion of the amount lent deposited or borrowed (called the principal sum).The total interest on an amount lent or borrowed depends on the principal sum the interest rate the compounding frequency and the length of time over which it is lent deposited or borrowed.

A fixed exchange rate sometimes called a pegged exchange rate is a type of exchange rate regime in which a currency s value is fixed or pegged by a monetary authority against the value of another currency a basket of other currencies or another measure of value such as gold.. There are benefits and risks to using a fixed exchange rate system. A fixed exchange rate is typically used to …

Fixed exchange rate system – Wikipedia

Interest – Wikipedia

Exchange rate – Wikipedia

Floating exchange rate – Wikipedia

Interest – Wikipedia

In finance an exchange rate is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in relation to another currency . For example an interbank exchange rate of 114 Japanese yen to the United States dollar means that ¥114 will be exchanged for US$1 or that US$1 will be exchanged for ¥114.

The IS–LM model or Hicks–Hansen model is a two-dimensional macroeconomic tool that shows the relationship between interest rates and asse…

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