When the Domestic Nominal Interest Rate Rises Because of an Increase

Multiple Choice

When the domestic nominal interest rate rises because of an increase in expected inflation, the expected appreciation of the dollar declines, ________ shifts out more than ________, and the exchange rate declines.

A) R^F; R^D
B) R^F; R^F
C) R^D; R^D
D) R^D; R^F