How do relatively high real interest rates in the United States typically affect the demand for dollars from foreign investors?

Show Answers

Lower the demand for dollars abroad, leading to a decline in the dollar's valueReduce foreign interest in dollars, resulting in the dollar gaining valueRaise foreign demand for dollars, causing the dollar to lose valueBoost foreign demand for dollars, causing the dollar to strengthen

Explanation

When real interest rates are higher in the U.S., foreign investors are more attracted to dollar-denominated assets. This increased demand for dollars leads to an appreciation of the currency.