An increase in the interest rate in the United States compared to the interest rate in Great Britain will

Question

Quizplus · Accepted Answer

An increase in the interest rate in the United States compared to the interest rate in Great Britain will result in higher returns for investors in U.S. dollar-denominated assets, thus increasing the demand for dollars (A) and increasing the U.S. interest rate differential (C). As a result, the answer is both A and C are correct (D). However, it will likely decrease the demand for pounds, so option B is incorrect.

An Increase in the Interest Rate in the United States