Principles of Macroeconomics / Unit 13 MAC 1211 short lesson, about 20 seconds
Relative Rates of Return
Captions available
The idea
Money moves toward the higher return. If interest rates rise here relative to abroad, foreign funds come in, so demand for the home currency rises and its supply falls, and it appreciates.
In practice
This is the link unit twelve built: monetary policy reaches the exchange rate through interest rates.
Where people slip
What matters is the rate here relative to elsewhere, not the rate here alone.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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