-Refer to Figures A, B, C, and D. Which of the figures best illustrates a situation where foreign interest rates rise relative to U.S. rates ceteris paribus?
A) Figure A and D
B) Figure B and C
C) Figure C
D) Figure D

Question

-Refer to Figures A, B, C, and D. Which of the figures best illustrates a situation where foreign interest rates rise relative to U.S. rates ceteris paribus?
A) Figure A and D 
B) Figure B and C 
C) Figure C 
D) Figure D

Quizplus · Accepted Answer

When foreign interest rates rise relative to U.S. rates, ceteris paribus, it typically leads to an appreciation of the foreign currency and a depreciation of the U.S. dollar. Figures B and C would best illustrate this scenario by showing the effects on exchange rates and capital flows that align with this economic principle.