For a major country with extensive capital flows, what is the effect of a decrease in interest rates?
A)A currency depreciation and increased net exports
B)A currency depreciation and reduced net exports
C)A currency appreciation and increased net exports
D)A currency appreciation and reduced net exports

Question

Quizplus · Accepted Answer

A decrease in interest rates typically leads to a depreciation of the country's currency because lower interest rates make investments in that country less attractive, leading to a decrease in demand for the currency. This depreciation makes the country's exports cheaper and more competitive abroad, thus increasing net exports.

For a Major Country with Extensive Capital Flows, What Is