In the foreign exchange market, when the U.S.interest rate rises, the supply of dollars ________ and the foreign exchange rate ________.

Question

Quizplus · Accepted Answer

When the U.S. interest rate rises, it makes U.S. bonds and financial assets more attractive to foreign investors, who will demand more dollars to purchase them. This increase in demand for dollars will drive up the value of the dollar relative to foreign currencies, causing the foreign exchange rate to rise. Therefore, the supply of dollars decreases and the foreign exchange rate rises.

In the Foreign Exchange Market, When the U