Suppose the foreign exchange market is in equilibrium and that the interest rate in Russia increases. How would the foreign exchange market be affected?
A) The supply of Russian rubles will decrease.
B) The demand for Russian rubles will decrease.
C) The Russian interest rate has no effect on the market.
D) The supply of Russian rubles will increase.
E) The demand for Russian rubles will increase.

Question

Quizplus · Accepted Answer

When the interest rate in Russia increases, it becomes more attractive for investors to hold assets in Russian rubles, leading to an increase in demand for the currency.

Suppose the Foreign Exchange Market Is in Equilibrium and That