Answer (A) is correct . If the interest rates in a given country rise, money will pour in from all over the world in pursuit of that country’s higher returns. This increase in demand for the country’s currency will boost its purchasing power.
Answer (B) is incorrect because A currency tends to increase relative to other currencies when interest rates in the country rise sharply. More investors will want to earn the higher rates of return available in that country.
Answer (C) is incorrect because A currency tends to increase relative to other currencies when interest rates in the country rise sharply. More investors will want to earn the higher rates of return available in that country.
Answer (D) is incorrect because A currency tends to increase relative to other currencies when interest rates in the country rise sharply. More investors will want to earn the higher rates of return available in that country.
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