Suppose that interest rates in the U.S. increase relative to interest rates in Great Britain. This is matched by an equivalent depreciation of the USD against the GBP. Other things being equal:

Multiple Choice

• None of the options.

• the U.S. current account with the UK will deteriorate.

• UK investment capital will flow into the U.S.

• the UK current account with the U.S. will improve.

• UK investment capital will flow out of the U.S.