If net exports become less sensitive to changes in the value of the domestic currency, they will be less sensitive to changes in interest rates.

Question

Quizplus · Accepted Answer

Net exports and the value of the domestic currency have an inverse relationship. If the sensitivity of net exports to changes in the value of the domestic currency decreases, it means that they are less affected by currency fluctuations. Therefore, they will be less sensitive to changes in interest rates, which are also linked to currency movements.

If Net Exports Become Less Sensitive to Changes in the Value