If the Fed increases interest rates, other things remaining the same, foreigners demand_{--------------------} dollars, thereby_{--------------------} the exchange rate. A)more; increasing B)the same number of; not affecting C)fewer; decreasing D)more; decreasing E)fewer; increasing

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Quizplus · Accepted Answer

When the Fed increases interest rates, it makes U.S. financial assets more attractive to foreign investors, leading to an increased demand for dollars to purchase these assets, thereby increasing the exchange rate.

If the Fed Increases Interest Rates, Other Things Remaining the Same