Question

which of these is most likely to cause an increase in the international value of the united states dollar?
a higher interest rates abroad
b more us citizens traveling abroad
c higher united states interest rates
d higher price level in the united states
e lower united states government expenditures

Explanation:

To determine what increases the dollar's international value, we analyze each option:

• Option A: Higher foreign interest rates would attract US investors to foreign assets, increasing demand for foreign currency and decreasing the dollar's value.
• Option B: More US citizens traveling abroad means increased demand for foreign currency (to spend abroad), reducing the dollar's value.
• Option C: Higher US interest rates attract foreign investors to US assets (like bonds). This increases demand for US dollars (to buy these assets), raising the dollar’s international value.
• Option D: A higher US price level makes US goods more expensive, reducing foreign demand for US products. This decreases demand for dollars, lowering its value.
• Option E: Lower government expenditures impact domestic economic activity (e.g., GDP, employment) but do not directly drive demand for the dollar in foreign exchange markets like interest rates do.

Answer:

C. higher United States interest rates