In the short run/long run, a strong currency goes with:
A) a low interest rate/a high interest rate.
B) a high interest rate/a high interest rate.
C) a high interest rate/a low interest rate.
D) a low interest rate/a low interest rate.

Question

Quizplus · Accepted Answer

In the short run, a strong currency may go with a low interest rate because investors may be attracted to the stability and strength of the country's currency despite the lower returns on their investments. However, in the long run, a strong currency is usually associated with a high interest rate. This is because a strong currency indicates a strong economy, which tends to attract more investment and create higher demand for the country's currency, leading to an appreciation in its value. To maintain the value of the currency and avoid inflation, the central bank may raise interest rates to reduce the money supply and maintain the currency's value.

In the Short Run/long Run, a Strong Currency Goes With