Answer to Question #247171 in Macroeconomics for Brita

Question

Which one of the following is most likely to increase the demand for US dollars on the South African foreign exchange market?

A. a recession in South africa

B. a rise in the interest rates in the US

C. an increase in the number of SA tourists visiting the US

D. a decrease in the gold price

Answer 1

Ans: (B) a rise in the interest rates in the US

As interest rates rise in the US, investors are withdrawing financial assets from emerging markets, which causes an increase in demand for the US dollar in these markets.