2. (9.5 points total)This question is based on international financial news from Spring 2018. The country that made the news back then was Argentina.

The next pair of diagrams show the Argentine money market along with the foreign exchange market. (Pay attention to how the countries are labeled and which version of the exchange rate is on the horizontal axis of the FX diagram!)

a. (1 pt) Suppose international investors start to anticipate a series of increases in the U.S. interest rates.

What do you expect them to do, and why?

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