Other things the same,an increase in the U.S.interest rate causes U.S.net capital outflow to
A)rise,so supply in the market for foreign-currency exchange shifts right.
B)rise,so demand in the market for foreign-currency exchange shifts right.
C)fall,so supply in the market for foreign-currency exchange shifts left.
D)fall,so demand in the market for foreign-currency exchange shifts left.

Question

Quizplus · Accepted Answer

An increase in the U.S. interest rate makes U.S. assets relatively more attractive to foreign investors, which increases the demand for U.S. dollars and reduces the supply of U.S. dollars in the market for foreign-currency exchange. This leads to a decrease in the U.S. net capital outflow and a shift of the supply curve to the left.

Other Things the Same,an Increase in the U