When the Fed raises the federal funds rate, in the foreign exchange market people ________ dollars and the price of the dollar ________ on the foreign exchange market.

Question

Quizplus · Accepted Answer

When the Fed raises the federal funds rate, it makes holding dollars more attractive because of higher returns on investments denominated in dollars. This increased demand for dollars leads to a rise in the price of the dollar on the foreign exchange market.

When the Fed Raises the Federal Funds Rate, in the Foreign