If the Australian interest rate rises relative to the interest rate in other countries,then the supply of dollars ________ and the demand for dollars ________.

Question

Quizplus · Accepted Answer

When the Australian interest rate rises relative to interest rate in other countries, it becomes more attractive to hold Australian dollars as they offer a higher return. This increased demand for Australian dollars leads to a decrease in the supply of Australian dollars on the foreign exchange market, which causes the exchange rate to appreciate. Therefore, the demand for dollars (in this case, Australian dollars) increases, while the supply of dollars decreases.

If the Australian Interest Rate Rises Relative to the Interest