Other things the same,a decrease in the U.S.price level leads to
A)a rise in U.S.interest rates and increased demand for foreign bonds.
B)a rise in U.S.interest rates and decreased demand for foreign bonds.
C)a fall in U.S.interest rates and increased demand for foreign bonds.
D)a fall in U.S.interest rates and decreased demand for foreign bonds.

Question

Quizplus · Accepted Answer

A decrease in the U.S. price level leads to a fall in U.S. interest rates because lower prices reduce the demand for money, thus easing pressure on interest rates. This, in turn, causes an increased demand for foreign bonds as investors seek higher yields.

Other Things the Same,a Decrease in the U