Answer to Question #195047 in Finance for Peter Masih

Question #195047

Describe how the prevailing interest rates in a country affect its exchange rates with the

currency of its major trading partner


1
Expert's answer
2021-05-19T10:55:10-0400
  1. When the rates are low, the commercial banks and companies take out loans on lower interest rates. This allows selling of goods at a cheap price, the Central Bank is the forced to print more money and inflation accelerates the currency to be cheaper.
  2. When rates are high, loans become more expensive while the good in the markets are also lower in competitiveness. The demand of loans fall, inflation slows down and the currency become more expensive.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS