Holding all else constant, higher interest rates in the United States would ________ the demand for U.S.dollars in the foreign exchange market.In turn, this will lead to a(n)_______ in the exchange rate, and subsequently, U.S.net exports would _______.

Question

Quizplus · Accepted Answer

Higher interest rates in the U.S. attract foreign investment, increasing the demand for U.S. dollars, which raises the exchange rate. A stronger dollar makes U.S. goods more expensive abroad, reducing net exports.

Holding All Else Constant, Higher Interest Rates in the United