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QUESTION 8 because there is greater demand for If interest rates rise in the United States relative to the rest of the world,

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Answer #1

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(8) When interest rates in the United States increases relative to the rest of the world, assets in the United States will yield higher returns compared to assets in rest of the world. So, people will buy assets in the United States which will require U.S. dollars. Thus, demand for U.S. dollars will increase because there is greater demand for assets with higher returns.

The answer is: (a) increase; higher.

(9) Pegged exchange rate is a policy in which the government sets a fixed exchange rate of its currency with a currency, a basket of currencies or gold. By keeping the exchange rate fixed, the exchange rate of the country is stabilized. In a flexible/floating exchange rate policy, the exchange rate is determined by the supply and demand of currencies.

The answer is: (b) fixed.


answered by: ANURANJAN SARSAM
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Answer #2

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(8) When interest rates in the United States increases relative to the rest of the world, assets in the United States will yield higher returns compared to assets in rest of the world. So, people will buy assets in the United States which will require U.S. dollars. Thus, demand for U.S. dollars will increase because there is greater demand for assets with higher returns.

The answer is: (a) increase; higher.

(9) Pegged exchange rate is a policy in which the government sets a fixed exchange rate of its currency with a currency, a basket of currencies or gold. By keeping the exchange rate fixed, the exchange rate of the country is stabilized. In a flexible/floating exchange rate policy, the exchange rate is determined by the supply and demand of currencies.

The answer is: (b) fixed.

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