If a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S. funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities should ____, and there is ____ pressure on its currency's equilibrium value.
A) increase; decrease; downward
B) decrease; increase; upward
C) increase; decrease; upward
D) decrease; increase; downward
E) increase; increase; upward

Question

Quizplus · Accepted Answer

An increase in a country's interest rates relative to U.S. rates makes its securities more attractive, leading to an inflow of U.S. funds and a decrease in outflow to U.S. securities, creating upward pressure on its currency.

If a Country Experiences an Increase in Interest Rates Relative