The demand for dollars will increase in foreign-exchange markets if:
A) U.S. interest rates are high relative to those overseas.
B) the U.S. is perceived to be a riskier place for investment relative to other nations.
C) foreigners want to buy less U.S. goods.
D) US consumers decide to buy more foreign goods than before.

Question

Quizplus · Accepted Answer

When U.S. interest rates are high relative to those overseas, foreign investors will demand more dollars to invest in U.S. financial markets, leading to an increase in the demand for dollars in foreign-exchange markets.

The Demand for Dollars Will Increase in Foreign-Exchange Markets If