Transactions in currency,bank deposits and so forth
A)tend to be insensitive to both changes in relative interest rates and the anticipated change in exchange rate.
B)tend to be sensitive to both changes in relative interest rates and the anticipated change in exchange rate.
C)tend to be sensitive to changes in relative interest rates but insensitive to the anticipated change in exchange rate.
D)tend to be insensitive to changes in relative interest rates but sensitive to the anticipated change in exchange rate.

Question

Quizplus · Accepted Answer

Transactions in currency and bank deposits are highly sensitive to changes in relative interest rates because these affect the return on different currencies' assets. They are also sensitive to anticipated changes in exchange rates, as expectations of currency appreciation or depreciation can lead to shifts in demand for that currency, influencing investment decisions and speculative activities.

Transactions in Currency,bank Deposits and So Forth