Assume that interest rates in London rise relative to those in Switzerland.Under a floating exchange-rate system,one would expect the pound (relative to the franc) to:
A) Depreciate due to the increased demand for pounds
B) Depreciate due to the increased demand for francs
C) Appreciate due to the increased demand for francs
D) Appreciate due to the increased demand for pounds

Question

Quizplus · Accepted Answer

When interest rates in London rise relative to Switzerland, investors are likely to seek higher returns in the UK, increasing demand for pounds and causing the pound to appreciate relative to the franc.

Assume That Interest Rates in London Rise Relative to Those