If the U.S. interest rate differential ________, the demand for dollars and the U.S. exchange rate________.
A) decreases; increase; appreciates
B) increases; decrease; depreciates
C) decreases; decreases; appreciates
D) increases; increase; appreciates

Question

Quizplus · Accepted Answer

When the U.S. interest rate differential increases, it makes U.S. assets more attractive to investors, leading to an increased demand for dollars and causing the U.S. exchange rate to appreciate.

If the US Interest Rate Differential ________, the Demand for Dollars and Dollars