If the interest rate in Japan increases while the interest rate in the United States remains constant,
A) the demand curve for dollars shifts to the left
B) the demand curve for dollars shifts to the right
C) the demand curve for yen shifts to the left
D) the demand curves for both yen and dollars remain constant

Question

Quizplus · Accepted Answer

If the interest rate in Japan increases while the interest rate in the United States remains constant, people will start to invest more in Japan to take advantage of the higher interest rates. This will increase the demand for yen and decrease the demand for dollars, causing the demand curve for dollars to shift to the left.

If the Interest Rate in Japan Increases While the Interest