When Americans and foreigners expect the return on dollar deposits to be high relative to the return on foreign deposits,there is a ________ demand for dollar deposits and a correspondingly ________ demand for foreign deposits.

Question

Quizplus · Accepted Answer

When the return on dollar deposits is higher than the return on foreign deposits, it creates a higher demand for dollar deposits and a lower demand for foreign deposits. This is because investors are more likely to invest in the currency that offers a higher return. Therefore, choice B is the correct answer.

When Americans and Foreigners Expect the Return on Dollar Deposits