The Real Foreign Exchange Rate Will ________ If _________ Decreases

Multiple Choice

The real foreign exchange rate will ________ if _________ decreases.

A) decrease; the interest rate differential between domestic and foreign interest rates
B) increase; the interest rate differential between domestic and foreign interest rates
C) increase; the average foreign exchange trader's opinion of what the exchange rate should be if there were no interest rate differentials
D) not be affected; the average foreign exchange trader's opinion of what the exchange rate should be if there were no interest rate differentials