Which of the following explains the interplay between exchange rates and interest rates?
A) If a government or central bank increases interest rates,the domestic currency will appreciate.
B) If a government or central bank decreases interest rates,the domestic currency will appreciate.
C) Changing the level of interest rates has no effect on exchange rates.
D) The effect of increases or decreases in the interest rate has unpredictable effects on the exchange rate.
Correct Answer:
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