From mid-2008 through early 2009, the value of the dollar moderately increased against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. Which of the following was a reason for this phenomenon?
A)High real interest rates in the United States compared to any other developed region in the world sparked an inflow of funds into the country.
B)U.S. assets were characterized by a high-risk, high-return payoff which prompted foreign investors to park their funds.
C)Foreign investors were excited at the possibility of high returns following the government bail-out of financial institutions.
D)Foreign investors put their money in low-risk U.S. assets such as low-yielding U.S. government bonds.
E)Foreign investors saw opportunities in the United States as the level of indebtedness had begun to reduce.

Question

Quizplus · Accepted Answer

From mid-2008 through early 2009, the dollar staged a moderate rally against major currencies, despite the fact that the American economy was suffering from a serious financial crisis. The reason seems to be that despite America's problems, things were even worse in many other countries, and foreign investors saw the dollar as a safe haven and put their money in low-risk U.S. assets, particularly low-yielding U.S. government bonds.

From Mid-2008 Through Early 2009, the Value of the Dollar