Which of the following would lead to an increase in the demand for British pounds?
A) A declining interest in British goods
B) A decrease in the U.S.interest rate relative to the British interest rate
C) Expectations that the exchange rate will fall
D) A decrease of the U.S.price level relative to the British price level
E) A decrease in the exchange rate.

Question

Quizplus · Accepted Answer

When the U.S. interest rate decreases relative to the British interest rate, it becomes more attractive for investors to hold British pounds, leading to an increase in demand for the currency.

Which of the Following Would Lead to an Increase in the Demand