An increase in the supply of U.S.dollars by the Federal Reserve will

Question

Quizplus · Accepted Answer

When there is an increase in the supply of U.S. dollars by the Federal Reserve, it will lead to inflation and reduce the value of the dollar. This is because when there is an abundance of a currency, it loses its value, and people tend to exchange it for other currencies or goods and services. Therefore, inflation fears in the United States will lead to a reduction in the value of the dollar. Options A and B are incorrect because an increase in the supply of U.S. dollars does not necessarily lead to economic growth or higher interest rates. Option D is incorrect because other countries raising their interest rates does not directly affect the value of the dollar.

An Increase in the Supply of U