Question
2) Which one of the following statements is the MOST accurate? A) For a fixed interest rate, a rise in the expected future exchange rate
2) Which one of the following statements is the MOST accurate?
A) For a fixed interest rate, a rise in the expected future exchange rate causes a rise in the current exchange rate.
B) For a fixed interest rate, a rise in the expected future exchange rate causes a fall in the current exchange rate.
C) For a fixed interest rate, a rise in the expected future exchange rate does not cause a change in the current exchange rate.
D) For a given dollar interest rate and a constant expected exchange rate, a rise in the interest rate of the euro causes the dollar to depreciate.
E) For a fixed interest rate, a fall in the expected future exchange rate causes a rise in the current exchange rate.
Answer:A
Why the answer is A? Please answer me why "a rise in the expected future exchange rate causes a rise in the current exchange rate"?
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