Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates

-Refer to Figure 17.3. If interest rates in the U.S. rise relative to interest rates in Switzerland, then we would expect a(n)

Question

Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates
 
-Refer to Figure 17.3. If interest rates in the U.S. rise relative to interest rates in Switzerland, then we would expect a(n)

Quizplus · Accepted Answer

When U.S. interest rates rise relative to those in Switzerland, it becomes more attractive to hold assets denominated in U.S. dollars, leading to a decrease in the demand for Swiss francs and an increase in the supply of francs as investors sell francs to buy dollars. This results in an appreciation of the dollar.

Figure 173 the Swiss Franc Under a System of Floating Exchange