If the interest rate rises, then _____ falls due to a(n) _____ of the exchange rate.
A) exports, appreciation
B) exports, depreciation
C) imports, appreciation
D) imports, depreciation

Question

Quizplus · Accepted Answer

When the interest rate rises, the currency appreciates because higher interest rates provide higher returns to investors, making the currency more attractive. This appreciation makes domestic goods more expensive for foreign buyers, leading to a fall in exports.

If the Interest Rate Rises, Then _____ Falls Due to A(n)