________ in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to depreciate,everything else held constant.

Question

Quizplus · Accepted Answer

When foreign interest rates increase, there is a higher return on foreign assets, causing demand for domestic assets to decrease as investors shift their investments to foreign assets with higher returns. Decreased demand for domestic assets leads to a decrease in demand for the domestic currency, resulting in a depreciation of the currency.

________ in the Foreign Interest Rate Causes the Demand for Domestic