With everything else the same, which of the following would increase the demand for U.S. dollars i foreign exchange market?
I. a rise in the U.S. interest rate
II. a fall in interest rates in foreign countries
III. a rise in the expected future exchange rate

Question

Quizplus · Accepted Answer

A rise in U.S. interest rates makes U.S. assets more attractive, increasing demand for dollars. A fall in foreign interest rates has a similar effect. A rise in the expected future exchange rate makes holding dollars more attractive, increasing demand.

With Everything Else the Same, Which of the Following Would