A rise in world real interest rates relative to U.S. interest rates
A)will have no effect on the demand for dollar-denominated assets because investors always prefer dollar-denominated assets.
B)will have no effect on the demand for dollar-denominated assets but will cause a decrease in the demand for assets denominated in other currencies.
C)will have no effect on the demand for dollar-denominated assets but will cause an increase in the demand for assets denominated in other currencies.
D)will cause international investors to increase their demand for dollar-denominated assets.
E)will cause international investors to decrease their demand for dollar-denominated assets.

Question

Quizplus · Accepted Answer

A rise in world real interest rates relative to U.S. interest rates will lead to a decrease in demand for dollar-denominated assets as investors will seek higher returns in other currencies.

A Rise in World Real Interest Rates Relative to U