Question

If the interest rate rises in the United States relative to other​ nations, then in the foreign exchange market the demand for dollars​ ____ and the supply of dollars​ ____. A. ​increases; increases B. ​increases; decreases C. ​decreases; decreases D. does not​ change; does not change E. ​decreases; increases

Answer 1

Answer:

B. ​increases; decreases

Explanation:

If the interest rate rises in the United States relative to other​ nations, then in the foreign exchange market the demand for dollars​ increases and the supply of dollars​ decreases .

Answer 2

Answer:

B. ​increases; decreases

Explanation:

Foreign exchange market can be defined as type of market in which the currency of one country is converted into that of another country.

For example, the conversion of dollars of the United States of America can be converted into naira (Nigeria) at the foreign exchange market.

Efficient market school is the market school which argues that forward exchange rates do the best possible job for forecasting future spot exchange rates, so investing in exchange rate forecasting services would be a waste of time because it is impossible to have a consistent alpha generation on a risk adjusted excess returns basis as market prices are only affected by new informations.

The efficient market school also known as the efficient market hypothesis (EMH) is a hypothesis that states that asset (share) prices reflect all information and it is very much impossible to consistently beat the market.

Also, forward exchange rates are exchange rates controlling foreign exchange transactions at a specific future date or time.

An interest rate can be defined as an amount of money that is charged as a percentage of the total amount borrowed from an individual or a financial institution.

Generally, if the interest rate rises in the United States relative to other​ nations, then in the foreign exchange market the demand for dollars​ increases and the supply of dollars​ decreases because of the high value of the dollar compared to the other currency.