Answer
a) appreciate, deficit
Work Step by Step
Increasing the investment in Great Britain will then increase the interest rate in the country. In turn, this will increase demand for the pound and decrease the interest rate. (The interest rate falls due to the increased demand for the pound.)
As the pound appreciates, the cost of foreign goods decreases (requiring fewer pounds to get the same goods than before). In turn, British goods are more expensive, and the trade balance shifts toward a deficit.
