In 1990, Britain joined the ERM. If the German Bundesbank increased interest rates, assuming Britain does not maintain its exchange rate peg:
A) the only option available to Britain would be to increase its interest rate.
B) the British pound would depreciate.
C) the British pound would appreciate.
D) the British economy would slow down.
Answer: B) the British pound would depreciate.
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Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?
A) Demand for dollars will decrease, and supply of dollars will decrease. B) Demand for dollars will increase, and supply of dollars will decrease. C) Demand for dollars will increase, and supply of dollars will increase. D) Demand for dollars will decrease, and supply of dollars will increase.
Which of the following would lead to an increase in the demand for computer software?
a. a decrease in the price of computer software b. a decrease in the price of personal computers c. an decrease in the cost of producing computer software d. an decrease in personal income