A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports.

Name: A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports.
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Question

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When interest rates rise, the currency tends to appreciate, which makes exports more expensive for foreign buyers and reduces net exports. Additionally, higher interest rates can discourage consumer and business spending, leading to a contraction in the overall economy.

A Rise in Interest Rates Tends to Contract the Economy