Use the following to answer questions .
Exhibit: Exchange Rates
-(Exhibit: Exchange Rates) Suppose interest rates in the U.S. rise relative to interest rates in
Foreign countries. This event will
A) decrease the demand for dollars and lower the exchange rate.
B) decrease the supply of dollars and lower the exchange rate.
C) increase the demand for dollars and raise the exchange rate.
D) increase the supply of dollars and lower the exchange rate.

Question

Use the following to answer questions .
Exhibit: Exchange Rates 
-(Exhibit: Exchange Rates) Suppose interest rates in the U.S. rise relative to interest rates in
Foreign countries. This event will
A) decrease the demand for dollars and lower the exchange rate. 
B) decrease the supply of dollars and lower the exchange rate. 
C) increase the demand for dollars and raise the exchange rate. 
D) increase the supply of dollars and lower the exchange rate.

Quizplus · Accepted Answer

When interest rates in the U.S. rise relative to interest rates in foreign countries, there is an increased demand for U.S. dollars as investors seek higher returns. This increased demand for dollars will cause the exchange rate to rise.

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