In the foreign exchange market, which of the following shifts the demand curve for U.S. dollars rightward?

Question

Quizplus · Accepted Answer

When U.S. interest rates increase relative to interest rates in other countries, foreign investors will demand more U.S. dollars to invest in U.S. assets, such as government bonds. This increases the demand for U.S. dollars and shifts the demand curve for dollars rightward. A decrease in the exchange rate (A) or an increase in the exchange rate (D) would affect the quantity demanded of U.S. dollars, but not the demand curve itself. A decrease in U.S. interest rates relative to other countries (B) would shift the demand curve for U.S. dollars leftward, decreasing the demand for U.S. dollars.

In the Foreign Exchange Market, Which of the Following Shifts