If the United States is facing a financial crisis while South Africa's economy is experiencing very strong growth and has not been impacted by a financial crisis, the loanable funds model as applied to currency exchange would indicate which of the following scenarios?

Question

If the United States is facing a financial crisis while South Africa's economy is experiencing very strong growth and has not been impacted by a financial crisis, the loanable funds model as applied to currency exchange would indicate which of the following scenarios?

Quizplus · Accepted Answer

In the loanable funds model, investors seek higher returns. If the US is in a financial crisis and South Africa's economy is strong, investors will likely sell US currency to buy South African currency, seeking better returns. This demand increases the value of the South African currency.

If the United States Is Facing a Financial Crisis While South