Question

In 2016, the Argentine Peso began appreciating against the US$ and the euro (as well as most other currencies).

What could have caused this?

A.) The Argentine government decided to pay holders of Argentine bonds that the Argentine government had previously defaulted on.

B.) The new government of Mauricio Macri, Argentina’s President, loses in its efforts to reform and improve business regulations.

C.) The Argentine government slaps export tariffs on corn, wheat, and wine.

D.) The Argentine central bank lowers interest rate to stimulate the economy.

explain

Answer 1

Option D)

With the decrease in interest rate, the supply of money increases which increases economic activity, improves productivity and the export potential increases and hence the demand for Peso increases.