A higher interest rate in the U.S. compared with other
industrialized countries will attract more investments in the U.S.
by foreign investors – holding all other factors constant. Does
this phenomenon lead to a stronger U.S. dollar (it takes more a
foreign currency to purchaser a U.S. dollar) or a weaker dollar (it
takes smaller foreign currency to purchase a dollar)? Using a
demand/supply model for U.S. dollars, explain.