When real interest rates in other countries rise relative to that in the U.S., other things being equal, we would expect the U.S. dollar to:

Question

Quizplus · Accepted Answer

When real interest rates in other countries rise relative to that in the U.S., other things being equal, demand for U.S. dollars decreases as investors seek higher returns in other countries with higher real interest rates. This decrease in demand leads to a depreciation of the U.S. dollar.

When Real Interest Rates in Other Countries Rise Relative to That