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

Question

Quizplus · Accepted Answer

When real interest rates in other countries rise relative to those in the U.S., it makes investments in those countries more attractive, leading to an outflow of capital from the U.S. to those countries. This increases the supply of U.S. dollars in the foreign exchange market, leading to a depreciation of the U.S. dollar.

When Real Interest Rates in Other Countries Rise Relative to That