An increase in the interest rate in the United States compared to the interest rate in Great Britain will
A) increase the U.S. interest rate differential.
B) increase the demand for pounds.
C) shift the demand curve for dollars rightward.
D) Both answers A and C are correct.

Question

Quizplus · Accepted Answer

An increase in the U.S. interest rate compared to the interest rate in Great Britain makes holding dollars more attractive, thereby increasing the U.S. interest rate differential (A) and shifting the demand curve for dollars rightward (C) as investors and savers seek to benefit from the higher returns.

An Increase in the Interest Rate in the United States