When the U.S. interest rate rises relative to that in other counties, in the foreign exchange market the demand for U.S. dollars _ and the supply of U.S. dollars .

Question

Quizplus · Accepted Answer

When the U.S. interest rate rises relative to other countries, investors will demand more U.S. dollars to earn the higher interest rate. This increased demand for U.S. dollars will cause the value of the dollar to rise, resulting in a decrease in the supply of U.S. dollars in the market. Therefore, the demand for U.S. dollars increases, and the supply of U.S. dollars decreases.