Question

answer these 4 . will rate after

A reduction in the British interest rate relative to the U.S. interest rate will cause a(n): appreciation of the dollar and an appreciation of the British pound. O appreciation of the dollar and a depreciation of the British pound. depreciation of the dollar and an appreciation of the British pound. O depreciation of the dollar and a depreciation of the British pound.

Answer 1

1 - Option B

Appreciation of dollar and depreciation of British pound

This is because as interest rate falls , investment demand for british pound falls. This will result in depreciation of currency. If pound will depreciate , dollar will appreciate.

The currencies will move in opposite direction and not in same dorection. British pound will appreciate when interest rate will rise. Hence option B will be correct

2 - Option A

Decrease the value of Japanese yen with respect to dollar

This will happen because of the decrease in demand for yen. The value of yen will increase when its demand will increase. Hence option A will be correct

3 - option C

Japanese export will become more expensive in US

US exports will be more expensive when US dollar will appreciate and not yen. Since the value of yen has risen , its product will be more expensive now for US.

4 - Option D

Purchase of US exports

This results in Inflow of dollar into US. The other transactions are not the source lf supply of dollar