Final answer:
Higher interest rates in a country cause the currency value to increase by attracting foreign investment and increasing demand for the country's currency. Conversely, lower interest rates relative to other countries can lead to a decrease in currency value due to reduced foreign investment and demand.
Step-by-step explanation:
To match the causes with their effects, consider the following relationships:
- Higher interest rates in a country lead to a higher currency value. When a country's interest rates are high compared to other countries, it tends to attract investment, increasing the demand for that country's currency, causing it to appreciate.
- Lower currency value is often the result of lower interest rates relative to other countries. When a country's interest rates are low, it is less attractive to investors, leading to a decrease in demand for that country's currency, which can cause the currency to depreciate.
- More people adopting foreign clothing styles is not directly related to currency valuation but may indicate increased cultural globalization or influence.
The subject of monetary policy and its impact on exchange rates is a crucial component of international business and economics.