If the U.S. interest rate differential increases, people will demand _ dollars and supply
Dollars.

Question

Quizplus · Accepted Answer

If the U.S. interest rate differential increases, people will demand more dollars because they can earn more interest on their investments in the U.S. as compared to other countries. This increased demand for dollars will lead to a decrease in the supply of dollars in the market, as people will hold onto their dollars instead of exchanging them for other currencies. Therefore, the correct choice is D, more dollars demanded and fewer dollars supplied.

If the US Interest Rate Differential Increases, People Will Demand _ Dollars