interest rates

• What tool can a government use to influence the demand for its currency?

  Interest rates
• How does an increase in interest rates affect the demand for the pound?

  It strengthens the pound as demand for pounds rises
• If a government raises interest rates, what action might people take regarding their money?

  They will convert their money to pounds to deposit in English banks
• What happens to the demand for the pound when interest rates fall?

  Demand for the pound decreases
• What is the overall effect of falling interest rates on the currency?

  It weakens the currency