If fiscal policy leads to higher interest rates, the dollar may appreciate and net exports fall.

Name: If fiscal policy leads to higher interest rates, the dollar may appreciate and net exports fall.
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Question

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Higher interest rates may attract foreign investors, leading to an increase in demand for dollars, resulting in a stronger dollar. A stronger dollar makes exports more expensive for foreign buyers, leading to a decrease in net exports.

If Fiscal Policy Leads to Higher Interest Rates, the Dollar