Aruba pegs its currency (the Aruban florin) to the U.S. dollar at a rate of Af 2 = $US1. Suppose that the actual exchange rate is equal to this pegged rate. Which of the following best describes the effect on Aruba's interest rates from purchasing dollars?
A) Interest rates will rise.
B) Interest rates will fall.
C) Interest rates will not change.
D) Interest rates will rise as the exchange rate depreciates.

Question

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The Answer of Aruba pegs its currency (the Aruban florin) to the U.S. dollar at a rate of Af 2 = $US1. Suppose that the actual exchange rate is equal to this pegged rate. Which of the following best describes the effect on Aruba's interest rates from purchasing dollars?
A) Interest rates will rise.
B) Interest rates will fall.
C) Interest rates will not change.
D) Interest rates will rise as the exchange rate depreciates.

Aruba Pegs Its Currency (The Aruban Florin) to the U