When real interest rates in other countries rise relative to that in the U.S., other things being equal, we would expect the U.S. dollar to
A) appreciate.
B) depreciate.
C) inﬂate.
D) deﬂate.

Question

Quizplus · Accepted Answer

When real interest rates in other countries rise relative to that in the U.S., foreign investors would be more likely to invest in those countries to take advantage of the higher returns. This leads to an increase in demand for the foreign currency, which causes the U.S. dollar to depreciate.

When Real Interest Rates in Other Countries Rise Relative to That