An investment analyst recommended that investors "gravitate toward the stronger currencies and countries that are running current-account and fiscal surpluses," such as South Korea and Taiwan.
Source: Paul J. Lim, "Suddenly, BRIC Markets Are on a Shakier Foundation," Wall Street
Journal,
January 9, 2015.
Part 2
Holding all other factors constant, we would expect a country that is running a government budget surplus to have a currency that is
A.
increasing in value as interest rates would be falling, increasing the supply of the currency.
B.
increasing in value as interest rates would be rising, increasing the demand for the currency.
C.
decreasing in value as interest rates would be falling, decreasing the demand for the currency.
D.
decreasing in value as interest rates would be falling, decreasing the supply of the currency.