Question: 2. In chapter 4, we covered monetary approach to exchange rates, our finding showed a positive relationship between interest rates and exchange rates.(i.e. As interest

2. In chapter 4, we covered monetary approach to exchange rates,

2. In chapter 4, we covered monetary approach to exchange rates, our finding showed a positive relationship between interest rates and exchange rates.(i.e. As interest rates increase, aggregate money demand will decrease. The exchange rates will increase as well.) However, in chapter 2&3, due to the asset approach, we found the opposite results. (i.e. As interest rates increase, through arbitrage activities, the exchange rates will decrease.) (1) Do you believe it is a paradox or not? (10%) (2) Can you comprehend why these findings are the opposite? (15%)

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