The U.S.interest rate has ________ on the supply of dollars and has ________ on the demand for dollars.

Question

Quizplus · Accepted Answer

An increase in the U.S. interest rate would increase the supply of dollars as foreign investors would want to invest in higher yielding U.S. securities. This would lead to a decrease in the demand for dollars as there would be an increase in supply of dollars available in the foreign exchange market. Similarly, a decrease in the U.S. interest rate would lead to a decrease in the supply of dollars and an increase in the demand for dollars as there would be less incentive for foreign investors to invest in U.S. securities.

The USinterest Rate Has ________ on the Supply of Dollars and and Has