Exchange rate increases Interest rate is also increased. Thus the correct answer is B.
What is the exchange rate?
The value of the currency in one country in relation to another indicates the rate of exchange. When one currency of a country gets exchanged with another between the economic zones and is important in evaluating trade and capital flow dynamics.
When the interest rate is high it means the value of a currency is appreciating as it reflects that saving in that country keeps a higher return. The purchasing capacity of the consumer is affected by the falling exchange rate.
This exchange rate will help to evaluate the values of different currencies as the interest rate is affected by the rate of exchange.
Therefore, option B increase rate increases are the appropriate answer.
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