An increase in the foreign real interest rate would cause the domestic country's net exports to ________ and cause the domestic country's IS curve to ________.
A)rise; shift up
B)rise; shift down
C)fall; shift up
D)fall; shift down

Question

Quizplus · Accepted Answer

An increase in the foreign real interest rate would make domestic assets relatively less attractive, leading to a decrease in net capital outflow and an increase in net exports. This would shift the IS curve up as higher net exports increase aggregate demand.

An Increase in the Foreign Real Interest Rate Would Cause