Suppose interest rates rise in the United States. We expect capital _____ to (from) the United States and the U.S. dollar price of foreign currencies to _____, all other things equal.

Question

Quizplus · Accepted Answer

When interest rates rise in the United States, it attracts foreign capital, leading to capital inflows. This increased demand for U.S. assets strengthens the U.S. dollar, causing the price of foreign currencies to fall.

Suppose Interest Rates Rise in the United States