Suppose that government bonds in country A pay 8 per cent rate of interest whereas equally safe bonds in county B yield 10 per cent, The interest rate differential is 2 per cent. Arrange the consequences of the same in sequential order.

(A) People will find investing in country B more attractive and will therefore demand less of country A's currency.
(B) Depreciation of country A's currency and an appreciation of country B's currency.
(C) Investors from country A will be attracted by the high interest rates in country B and will buy the currency of country B selling currency of country A.
(D) The demand curve for country A's currency will shift to the left and the supply curve will shift to the right.

Choose the correct answer from the options given below:

(C), (A), (D), (B)

The correct answer is Option (1) → (C), (A), (D), (B)

(C) Investors from country A will be attracted by the higher 10% interest rate in country B and will buy B’s currency while selling A’s currency. This is the first step.

(A) As a result, people will find investing in country B more attractive and will demand less of country A’s currency.

(D) The demand curve for country A’s currency shifts left (less demand) and the supply curve shifts right (more people selling A’s currency to buy B’s).

(B) These market forces cause a depreciation of country A’s currency and an appreciation of country B’s currency.