Question

Suppose interest rates increase in the United States. We expect capital _____ to the United States and the U.S. Dollar price of foreign currencies to _____, all other things equal.

Answer 1

Falls shapely -  the damand for pounds: Suppose interest rates fall shapely in the United States but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates we can expect the damand for pounds in the United states to ncrease rates falls shapely in the United States but are unchanged decrease, the supply of pounds to increase, and the dollar to appreciate relative to the pound.