If for a particular county an increase in the interest rate is more or less matched by an expected depreciation in the local currency,
A)traders will probably be tempted to find another country to invest in.
B)the interest rate increase per se will not be enough to spark capital flow into the country.
C)both a and b are true
D)capital will glow out of the country as the disgruntled citizens riot and go to war with the neighbors.

Question

Quizplus · Accepted Answer

If the interest rate increase is offset by a depreciation in the local currency, the potential gains from higher interest rates are negated by the loss in currency value, making the country less attractive for investment.

If for a Particular County an Increase in the Interest