How Will an Interest Rate Increase in the United States

question 215

Multiple Choice

How will an interest rate increase in the United States affect equilibrium in the market for dollars against foreign currencies? (Assume the exchange rate is stated in terms of foreign currency per U.S.dollar.)

• A)The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded cannot be determined.
• B)The equilibrium exchange rate will decrease,and the equilibrium quantity of dollars traded cannot be determined.
• C)The equilibrium exchange rate cannot be determined,and the equilibrium quantity of dollars traded will increase.
• D)The equilibrium exchange rate will increase,and the equilibrium quantity of dollars traded will increase.