2B8B COUNTRY R’S CURRENCY WOULD TEND TO DEPRECIATE RELATIVE TO COUNTR...

195.

CSO: 2B8a

LOS: 2B8b

Country R’s currency would tend to depreciate relative to Country T’s currency when

a.

Country R switches to a more restrictive monetary policy.

b.

Country T has a rapid rate of growth in income that causes imports to lag behind

exports.

c.

Country R has a rate of inflation that is lower than the rate of inflation in Country T.

d.

Country R has real interest rates that are lower than real interest rates in Country T.

Section C: Decision Analysis and Risk Management