If Janet Yellen,Chair of the Federal Reserve Board,begins to tighten monetary policy by raising US interest rates next year,what is the likely impact on the value of the dollar?
A) The value of the dollar falls when US interest rates rise.
B) The value of the dollar rises when US interest rates rise.
C) The value of the dollar is not related to US interest rates.
D) This is known as Purchasing Power Parity or PPP.
E) The Federal Reserve has no impact at all on interest rates.

Question

Quizplus · Accepted Answer

Generally, when interest rates rise, foreign investors will invest more money in the US, which increases the demand for dollars and therefore, the value of the dollar.

If Janet Yellen,Chair of the Federal Reserve Board,begins to Tighten