If Real Interest Rates in the United States Are Higher

Multiple Choice

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

A) The dollar will depreciate; the current account will move toward a deficit.
B) The dollar will depreciate; the current account will move toward a surplus.
C) The dollar will appreciate; the current account will move toward a deficit.
D) The dollar will appreciate; the current account will move toward a surplus.