If the real interest rate in the U.S. decreases relative to the real interest rate in Japan then:
A) more capital will flow from the U.S. to Japan causing the dollar to appreciate.
B) more capital will flow from the U.S. to Japan causing the dollar to
Depreciate.
C) more capital will flow from Japan to the U.S. causing the dollar to appreciate.
D) more capital will flow from Japan to the U.S. causing the dollar to depreciate.

Question

Quizplus · Accepted Answer

When the real interest rate in the U.S. decreases relative to the real interest rate in Japan, investors are likely to seek higher returns by investing in Japan. This increased demand for Japanese assets requires converting dollars to yen, increasing the supply of dollars and the demand for yen, which typically leads to the depreciation of the dollar.

If the Real Interest Rate in the U