Analyst Bradley Lindge has collected information about the economy of the Grakh Republic. He has assessed the demand for exports from the country, the interest rates in the country, and estimates regarding future exchange rates. Lindge is most likely attempting to determine the: A) supply of Grakh Republic currency. B) expected change in Grakh Republic interest rates relative to those of foreign countries. C) demand for Grakh Republic currency.

I vote C

I agree with C. Seems like all the factors are related to the demand/attractiveness of a currency.


Yup it is C. I screwed this one up. Can someone explain it to me?

I think it’s C) Exports and interest rates would influence the demand for Grakh’s currency. It’s not B as there is no analysis of other countries. It’s not A as the supply of a currency is more dependent on imports, monetary, and fiscal policy.

C Assessing demands of the exports of the country - when Grakh exports goods to other countries the trading partners will demand Grakh currency, and supply foreign exchange. Interest rates -a bit dubious here but assuming that it’s interest rates are higher people will want to invest in Grakh bonds. Again this means that Grakh currency is demanded.

Currency appreciates when Demand for exports increases, Nominal interest rates in the country increases, future exchange rates is expected to be higher. Ans C