Question

Relatively high interest rates in the united states causes the dollar to ____ in the ____.

a. appreciate, long run

b. depreciate, long run

c. appreciate, short run

d. depreciate, short run

Answer 1

a. appreciate, long run

Step-by-step explanation:

• As when a currency has relative higher interest rates this means that the dollar will appreciate and hence maintain long-run stability. As the dollar can buy more than its equivalent.
• This is also caused by the increase in the demands for the money in the home country and tends to attract foreign investments.

• A longer run tend is more likely to be caused by inflation due to the higher interest rates the dollar.