Relatively high interest rates in the United States contributes to a strong U.S. dollar (less dollars per another currency) and this may lead to a deficit on the U.S. current account.

Question

Quizplus · Accepted Answer

High interest rates in the United States attract foreign capital seeking higher returns, which increases demand for the U.S. dollar, making it stronger. A stronger dollar makes U.S. exports more expensive and imports cheaper, potentially leading to a higher trade deficit, which is a component of the current account.

Relatively High Interest Rates in the United States Contributes to a Strong