If interest rates fall in country A,other things constant,which of the following statements is true?

A) The demand for country A's currency will fall and the currency will depreciate.
B) The demand for country A's currency will fall and the currency will appreciate.
C) The demand for country A's currency will increase and the currency will depreciate.
D) The demand for country A's currency will increase and the currency will appreciate.
E) There will be a net inflow of foreign investments in country A.

Question

Fatima Yousofi · Accepted Answer

Final Answer : A, Explanation :  When interest rates fall in a country, the return on investment in that country decreases. This leads to a decrease in demand for that country's currency as investors seek higher returns elsewhere. The decrease in demand for the currency results in depreciation.

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