Suppose the current exchange rate between the euro and the United States dollar is 1.15 euros per dollar. If interest rates in the United States increase and interest rates in Europe remain unchanged then
A) the demand for dollars will decrease.
B) the demand for dollars will increase.
C) the demand for euros will increase.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

An increase in interest rates in the United States will make the dollar more attractive for investors seeking higher returns on their investments. Therefore, the demand for dollars is likely to increase, leading to an appreciation in the value of the dollar relative to the euro.

Suppose the Current Exchange Rate Between the Euro and the United