When the "real" interest rate is relatively low in a given country, then the currency of that country is typically expected to be:
A) weak, since the country's quoted interest rate would be high relative to the inflation rate.
B) strong, since the country's quoted interest rate would be low relative to the inflation rate.
C) strong, since the country's quoted interest rate would be high relative to the inflation rate.
D) weak, since the country's quoted interest rate would be low relative to the inflation rate.

Question

When the "real" interest rate is relatively low in a given country, then the currency of that country is typically expected to be:​
A) ​weak, since the country's quoted interest rate would be high relative to the inflation rate.
B) ​strong, since the country's quoted interest rate would be low relative to the inflation rate.
C) ​strong, since the country's quoted interest rate would be high relative to the inflation rate.
D) ​weak, since the country's quoted interest rate would be low relative to the inflation rate.

Quizplus · Accepted Answer

When the "real" interest rate is relatively low, it often means that the nominal interest rate is low compared to the inflation rate. This can make the currency less attractive to foreign investors seeking higher returns, leading to a weaker currency.

When the "Real" Interest Rate Is Relatively Low in a Given