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Frozen capital flows

After a country's (not USA) foreign-capital flows are frozen, a large international supply of USD dollars shows up. What happens to the quantity of USD dollars demanded?

a. Quantity demanded of dollars goes up, at lower interest rates.

b. Quantity demanded of dollars goes up, at higher interest rates.

c. Quantity demanded of dollars goes down, at lower interest rates.

d. Quantity demanded of dollars goes down, at higher interest rates.

Solution Preview

Since foreign-capital flows are frozen, the demand for domestic currency will rise, which will result in an ...

Solution Summary

The solution answers the multiple choice question and also provides a brief explanation. Overall, a good response to the question.

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