If short-term interest rates rise in Germany, then the exchange value of the dollar will appreciate against the euro in the long run.

Question

Quizplus · Accepted Answer

The given statement mentions an increase in short-term interest rates in Germany, but the graph shows the market for Swiss Francs, not the Euro. Additionally, the graph shows the current equilibrium point between the US dollar and Swiss Franc, but not necessarily the Euro. Therefore, it is not clear whether an increase in short-term interest rates in Germany will cause the US dollar to appreciate against the Euro.

If Short-Term Interest Rates Rise in Germany, Then the Exchange