Question 1 All else constant, if the foreign interest rate , the denand for doke

Question

Question 1 All else constant, if the foreign interest rate , the denand for dokestic assets willand the donestic currency will appreciate. Question 2 A decrease in the denand for a country's exports causes its currency to the long run, while decreased denand For inports causes its currency to . in Question3 A11 else constant, a decrease in the denand for foreign goods relative to donestic goods tends to because foreign goods will only have a strong demand if the value of the donestic currency 1s the donestic currency

Explanation / Answer

1.

The correct explanation will be;

All else constant, if the foreign interest rate decreases, the demand for domestic assets will increase and the domestic currency will appreciate.

This is because if the interest rate of the foreign decrease, then there will be an inflow of capital and therefore the demand for domestic assets and currency increase and so the currency will be appreciated.

2.

A decrease in the demand for a country's exports causes its currency to depreciates in the long-run, while decreased demand for imports causes its currency to appreciate.

This is because if the country export decreases, then the demand for domestic currency decrease, so the domestic currency depreciates.

3.

All else constant, a decrease in the demand for foreign goods relative to domestic goods tends to appreciate the domestic currency because foreign goods will only have a strong demand if the value fo the domestic currency is low ( depreciates.)

This is because if the domestic goods demand will increase, then the domestic currency will appreciate and foreign currency will depreciate and vice-versa.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.