With a floating exchange rate, an increase in the U.S. interest rate will cause

Name: With a floating exchange rate, an increase in the U.S. interest rate will cause
Brand: Quizplus
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Question

Quizplus · Accepted Answer

An increase in the U.S. interest rate would make U.S. assets more attractive to foreign investors, causing an increase in capital flow into the United States. This would increase the demand for dollars, leading to an appreciation of the dollar. Therefore, option D is correct as each of the answers is correct.

With a Floating Exchange Rate, an Increase in the U