When the Fed eases U.S. monetary policy, domestic interest rates ________, making U.S. assets relatively less attractive to foreign investors, and ________ the equilibrium exchange rate.
A)rise; increasing
B)fall; increasing
C)fall; decreasing
D)rise; decreasing

Question

Quizplus · Accepted Answer

When the Fed eases U.S. monetary policy, interest rates fall which discourages foreign investors. Foreign investors then want fewer dollars, which decreases the equilibrium exchange rate.

When the Fed Eases U