Higher real interest rates in the United States compared with other countries increases the demand for U.S. dollar bank accounts and other American interest-bearing assets.

Question

Quizplus · Accepted Answer

When the real interest rates in the United States are higher than those in other countries, foreign investors may seek to invest their money in U.S. dollar bank accounts and other American interest-bearing assets in order to earn a greater return on their investment. This can increase the demand for U.S. dollars and push up the value of the currency relative to other currencies.

Higher Real Interest Rates in the United States Compared with Other