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

During times of financial crisis, investors seek out safe-haven assets, which are typically low-risk and low-yield. U.S. government bonds are considered one of the safest investments in the world, and during the financial crisis, foreign investors flocked to these assets, driving up demand for dollars and increasing its value relative to other currencies. This phenomenon is known as a flight to safety.

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