Given a floating exchange rate system an increase in ____ would cause the dollar to appreciate against the euro.
A) U.S.labor costs
B) The U.S.money supply
C) U.S.prices of goods
D) U.S.real interest rates

Question

Quizplus · Accepted Answer

An increase in U.S. real interest rates would cause the demand for the dollar to increase as foreign investors would be attracted to the higher returns. This increased demand for dollars would cause the dollar to appreciate against the euro in the floating exchange rate system.

Given a Floating Exchange Rate System an Increase in ____