If the U.S. interest rate __________rises, the exchange rate and net exports __________.
A) falls; increase
B) falls; decrease
C) rises; decrease
D) rises; increase

Question

Quizplus · Accepted Answer

When the U.S. interest rate rises, the demand for U.S. dollars increases, leading to an appreciation in the exchange rate. As the exchange rate increases, U.S. exports become relatively more expensive, leading to a decrease in net exports.

If the US Interest Rate __________Rises, the Exchange Rate and Net Exports