If the U.S. interest rate rises while interest rates in the rest of the world do not change, the higher
u.S. interest rate
A) increases the demand for dollars.
B) has no effect on the demand for dollars.
C) will stop all trading between the currencies of the U.S. and other countries.
D) decreases the demand for dollars.

Question

Quizplus · Accepted Answer

When the U.S. interest rate rises while interest rates in other countries do not change, investors will seek to earn higher returns by investing in U.S. assets, leading to an increase in demand for dollars.

If the US Interest Rate Rises While Interest Rates in the Rest