Question

Suppose that in the current economy we found out that Brazil had interest rates 25% higher than the US over the last six months but that the Brazilian currency had depreciated by 20 % in the same time period. How would you interpret this? What if the change in the price level was larger in absolute value than the amount of depreciation? What factors would you think might be responsible for such movements in the data?

Answer 1

the interest rate difference between the 2 nations, US and. Beazul indicates that the dollars from us will e invested in Brazil as the inteeder hate is more cales the invested there For earl, So Exchange Rate supply of MICH cuerenc my USD) NEM question The exchange rate hence falls as shown in the Throw the exchange rate has fallen hence the I enforts from Beda u will become cheapes and will be expensive importe Now the inflation for Brazil will rise and hence the rise in prices. The fires increase could be higher for Blazil in comparison with depreciatinfo v o (1) Brazil is more import dependent on us fa goods demands (2) If most of the services demand are paid ourseas in domestic currency which is lossing its value.