Question
Could someone help with the following 2 questions? A country has a fixed exchange rate. If world interest rates rise, the country will have to
Could someone help with the following 2 questions?
- A country has a fixed exchange rate. If world interest rates rise, the country will have to ( Buy/Sell ) domestic currency and ( Buy/Sell ) foreign currency to maintain the fixed exchange rate. The fixed exchange rate has become relatively more ( Undervalued/Overvalued )
- Part of the North American Free Trade Agreement (NAFTA) opened the Mexican stock market to U.S. and Canadian investors for the first time. For Mexico, there would be:
A. only an effect on direct investment from the U.S. because of the shared border between the two countries.
B. no effect on direct investment or portfolio investment because Mexico already has significant foreign investment as the smallest of the three economies.
C. no effect on portfolio investment. But, direct investment would rise as foreign investors have an increased ability to purchase Mexican financial assets through the Mexican stock market.
D. no effect on direct investment. But, portfolio investment would rise as foreign investors have an increased ability to purchase Mexican financial assets through the Mexican stock market.
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