When the Fed raises the federal funds rate, the exchange rate_{--------------------}and net exports_{--------------------}

Question

Quizplus · Accepted Answer

When the Fed raises the federal funds rate, it typically leads to an appreciation of the domestic currency (exchange rate increases) because higher interest rates attract foreign capital. This makes domestic goods more expensive for foreign buyers, leading to a decrease in net exports.

When the Fed Raises the Federal Funds Rate, the Exchange