Assume that Switzerland and Britain have floating exchange rates. Other things unchanged, if a tight money policy raises interest rates in Britain as compared to Switzerland,
A)gold bullion will flow into Switzerland.
B)the Swiss franc will depreciate.
C)the pound will depreciate.
D)the Swiss franc will appreciate.

Question

Quizplus · Accepted Answer

Higher interest rates in Britain make British assets more attractive, increasing demand for the pound and causing the Swiss franc to depreciate relative to the pound.

Assume That Switzerland and Britain Have Floating Exchange Rates