If interest rates rise in the United States and remain the same in the South Pacific, then what can we expect to occur in the foreign exchange market for yaps (South Pacific currency)?

Question

Quizplus · Accepted Answer

When interest rates rise in the United States and remain the same in the South Pacific, investors are likely to shift their investments to the United States to take advantage of the higher returns. This shift increases the demand for the US dollar and decreases the demand for the South Pacific currency, the yaps, leading to a decrease in its equilibrium price in the foreign exchange market.

If Interest Rates Rise in the United States and Remain