If the interest rate in the United States increases, then in the foreign exchange market the
A) supply of U.S. dollars will increase.
B) demand for U.S. dollars will remain unchanged.
C) demand for U.S. dollars will decrease.
D) demand for U.S. dollars will increase.

Question

Quizplus · Accepted Answer

When the interest rate in the United States increases, foreign investors are attracted to invest in U.S. assets to earn higher returns, leading to an increased demand for U.S. dollars to purchase these assets.

If the Interest Rate in the United States Increases, Then