ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The exchange rate will depreciate
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The exchange rate will appreciate
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The rate of inflation will accelerate
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The rate of inflation will become negative
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Detailed explanation-1: -Brazil’s economic performance in 2010 was remarkable as witness the high growth of 7.5%; the increase in formal employment by 2.1 million new posts; the reduction in the rate of unemployment to its lowest levels: an average of 6.7% in the principal metropolitan regions; and a 4.4% increase in real average income.
Detailed explanation-2: -If the Fed raises interest rates, it increases the cost of borrowing, making both credit and investment more expensive. This can be done to slow an overheated economy. If the Fed lowers rates, it makes borrowing cheaper, which encourages spending on credit and investment.
Detailed explanation-3: -Higher interest rates can increase a currency’s value. They can attract more overseas investment, which means more money coming into a country and higher demand for the currency.
Detailed explanation-4: -This is, according to X, an institutional rubble that continues to damage the Brazilian economy: it creates inflationary inertia, because today’s inflation is dependent on the past. And to overcome this inertia, interest rates need to be high.