If the Federal Reserve raises the U.S. interest rate, foreignersʹ
A) demand for U.S. dollars will decrease and the exchange rate will fall.
B) demand for U.S. dollars will decrease and the exchange rate will rise.
C) demand for U.S. dollars will increase and the exchange rate will rise.
D) demand for U.S. dollars will increase and the exchange rate will fall.

Question

Quizplus · Accepted Answer

When the Federal Reserve raises U.S. interest rates, U.S. assets become more attractive to foreign investors, increasing the demand for U.S. dollars and causing the exchange rate to rise.

If the Federal Reserve Raises the U