Other things being equal, the international value of foreign currencies will increase against the U.S. dollar if
A) U.S. citizens reduce spending on imports.
B) the U.S. Federal Reserve raises real interest rates.
C) the number of foreign tourists in the United States increases.
D) foreigners withdraw funds from U.S. money markets.

Question

Quizplus · Accepted Answer

When foreigners withdraw funds from U.S. money markets, they convert U.S. dollars into their own currency, increasing the demand for their currency relative to the U.S. dollar. This leads to an increase in the international value of foreign currencies against the U.S. dollar.

Other Things Being Equal, the International Value of Foreign Currencies