3. Interest rate differentials The following graph depicts the market for U.S. dollars in terms of Algerian dinars. Suppose the interest rate in the United States increases, while in the rest of the world, interest rates remain the same. This makes U.S. assets desirable to Algerian investors. On the following graph, shift one or both of the curves to show the effect of the change in the desirability of U.S. assets on the exchange rate. Supply Demand O Supply EXCHANGE RATE (Dinars per dollar) Demand QUANTITY OF DOLLARS A rise in the interest rate in the United States causes of the dollar. Algerian goods imported into the United States become attractive to U.S. consumers because they are expensive. Conversely, U.S. exports become attractive to Algerian consumers. Therefore, U.S. net exports