When the interest rate falls, the value of the U.S. dollar in foreign exchange markets tends to _____ and net exports tend to _____.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease

Question

Quizplus · Accepted Answer

When the interest rate falls, the value of the U.S. dollar tends to decrease because lower interest rates make dollar-denominated financial assets less attractive to investors, leading to a depreciation of the dollar. This depreciation makes U.S. goods cheaper for foreigners, thus increasing net exports.

When the Interest Rate Falls, the Value of the U