Other things remaining the same, the U.S. interest rate differential increases if the U.S. interest rate
A) falls and foreign interest rates rise.
B) falls and foreign interest rates remain constant.
C) remains constant and foreign interest rates rise.
D) rises and foreign interest rates remain constant.

Question

Quizplus · Accepted Answer

If the U.S. interest rate rises while foreign interest rates remain constant, the U.S. interest rate differential will increase. This is because the difference between the U.S. interest rate and foreign interest rates will be greater than before.

Other Things Remaining the Same, the U