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Question: A higher interest rate in the U.S. compared with other industrialized countries will attract more investments in the U.S. by foreign investors - holding all other factors constant. Does this phenomenon lead to a stronger U.S. dollar (it takes more a foreign currency to purchaser a U.S. dollar) or a weaker dollar (it takes smaller foreign currency to purchase a dollar)? Using a demand/supply model for U.S. dollars, explain.

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