"When there is low inflation, it will be backed by low interest and an appreciated currency and not depreciated currency." Isn't this statement wrong as inflation and interest rates have an inverse relationship.
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"When there is low inflation, it will be backed by low interest and an appreciated currency and not
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- Explain why you agree or disagree with the following statements: A country’s currency will appreciate if its inflation rate is less than that of the rest of the world.What can international business people do to protect their companies from increasing inflation and a weakening dollar?A country with fixed exchange rate can always raise its policy interest rate to curb down inflation.” – True or false? Explain.
- Explain how higher interest rate appreciates the value of the currency when in fact it increases the rate of inflation. How can you synthesize this issue?Low interest rates means low inflation which means depreciated currency. This stimulates businessmen to invest abroad as interest rates are low. How can they invest abroad if the currency is depreciated? Wouldn't that be illogical and unfeasible? (According to Mankiw's textbook)Lower Interest rates encourage additional investment spending, which gives the economy a boost in times of slow economic growth. (Investopedia) Is this talking about investment spending abroad or investment spending in general? If Investment abroad increases how can that boost the economy? Aren't those statements contradictory?Recently, Turkey has experienced high inflation and high interest rates. IN spite of that its currency depreciated at historical levels. Is this because of other reasons than high inflation and high interest rates? Do we normally assume "ceteris paribus" when talking about this correlation? Even though its currency depreciated, there were investments made in Turkey. Why?During 1995, the Mexican peso exchange rate rose from 5.33 peso/$ to 7.64 peso/$. At the same time, US inflation was approximately 3% in contrast to Mexican inflation of about 48.7%. By how much did the nominal value of the peso change during 1995? By how much did the real value of the peso change over this period?
- Interest rates How do interest rates link money market and foreign exchange market? Which state body determines the value of the interest rate and what instruments are used to regulate it? How – through which macroeconomic channels do interest rates affect markets for goods and services?If Mexicans go on a spending spree and buy twice asmuch French perfume and twice as many Japanese TVs,English sweaters, Swiss watches, and bottles of Italianwine, what will happen to the value of the Mexican peso?Suppose that a U.S. firm converts dollars into pounds in order to invest in a British enterprise in the U.K. A year later, the return on the investment is 12 percent in terms of pounds. If, during that period, the dollar appreciated against the pound, then the return on the investment in dollar terms would be A.) dependent on the inflation rate, not the exchange rate. B.) also 12 percent. C.) less than 12 percent. D.) greater than 12 percent.