the currency of hamiltonia is the shot, and the currency of the united states is the dollar. if citizens of…

the currency of hamiltonia is the shot, and the currency of the united states is the dollar. if citizens of hamiltonia want to take advantage of relatively higher interest rates in the united states, which of the following will happen? choose 1 answer: a the money supply in hamiltonia will increase. b the supply of the shot in the foreign exchange market for the shot will increase. c the demand for the dollar in the foreign exchange market for the dollar will decrease. d the demand for the shot in the foreign exchange market for the shot will increase. e the money supply in hamiltonia will decrease.

the currency of hamiltonia is the shot, and the currency of the united states is the dollar. if citizens of hamiltonia want to take advantage of relatively higher interest rates in the united states, which of the following will happen? choose 1 answer: a the money supply in hamiltonia will increase. b the supply of the shot in the foreign exchange market for the shot will increase. c the demand for the dollar in the foreign exchange market for the dollar will decrease. d the demand for the shot in the foreign exchange market for the shot will increase. e the money supply in hamiltonia will decrease.

Answer

Brief Explanations:

When Hamiltonians want to invest in the US due to higher - interest rates, they need to exchange their currency (shots) for US dollars. So, they will supply more shots in the foreign - exchange market for shots. This increases the supply of shots in the foreign - exchange market for shots. The money supply in Hamiltonia doesn't directly change just because of this investment decision (it's not related to the central bank's actions like open - market operations etc. in this context). The demand for dollars will increase as they need dollars to invest, and the demand for shots will decrease in the foreign - exchange market as they are being exchanged for dollars.

Answer:

B. The supply of the shot in the foreign exchange market for the shot will increase.