If the Fed raises the federal funds rate so that the exchange rate rises, then imports __________and exports____________ .
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase

Question

Quizplus · Accepted Answer

When the Fed raises the federal funds rate, it often leads to a stronger domestic currency, making imports cheaper and exports more expensive, thus increasing imports and decreasing exports.

If the Fed Raises the Federal Funds Rate So That