A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports. Provide the reasoning behind this conclusion.
What will be an ideal response?
Interest rate differentials and capital flows are typically the most important determinants of exchange rate movements. Suppose interest rates in the United States rise while foreign interest rates remain unchanged. This change in relative interest rates will attract capital to the United States and cause the dollar to appreciate. An appreciating dollar will, in turn, reduce net exports, prices, and output in the United States.
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Explain how to calculate the slope of a non-linear function. What does the slope measure?
What will be an ideal response?
The essential feature of a ________ is that it immediately fixes the rate at which a specified amount of one currency is to be delivered in exchange for a specific amount of another at a future date
A) forward contract B) spot contract C) money contract D) bid contract