The relationship between changes in foreign interest rates relative to U.S. interest rates and the demand for dollars is
A)positive.
B)inverse.
C)horizontal.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

When foreign interest rates increase relative to U.S. interest rates, the demand for dollars decreases, as investors seek higher returns in the foreign currency. Therefore, there is an inverse relationship between changes in foreign interest rates relative to U.S. interest rates and the demand for dollars.

The Relationship Between Changes in Foreign Interest Rates Relative to U.S