Figure 10-6

-Refer to Figure 10-6.An increase in U.S.interest rates would _______ the demand for U.S.dollars, _______ the exchange rate, and lead to a(n)_______ in net exports.The results of such a policy are represented in _______.

Question

Figure 10-6
 
-Refer to Figure 10-6.An increase in U.S.interest rates would _______ the demand for U.S.dollars, _______ the exchange rate, and lead to a(n)_______ in net exports.The results of such a policy are represented in _______.

Quizplus · Accepted Answer

An increase in U.S. interest rates would attract foreign capital, increasing the demand for U.S. dollars, which would increase the exchange rate. This makes U.S. goods more expensive abroad, leading to a decrease in net exports. These effects are represented in Panel (b).

Figure 10-6 -Refer to Figure 10-6.An Increase in U.S.interest Rates Would _______