Everything else being the same, if the interest rate in the United States increases, then in the foreign exchange market the
A) demand for U.S. dollars will remain unchanged.
B) demand for U.S. dollars will increase.
C) demand for U.S. dollars will decrease.
D) supply of U.S. dollars will increase.

Question

Quizplus · Accepted Answer

When the interest rate in the United States increases, investments in the U.S. become more attractive, leading to an increased demand for U.S. dollars as investors exchange their currency for dollars to invest in the U.S.

Everything Else Being the Same, If the Interest Rate in the United