An increase in the interest rates in a country ________.

Question

Quizplus · Accepted Answer

An increase in interest rates in a country makes it relatively more attractive for foreign investors to invest in that country. This leads to an appreciation of the domestic currency which in turn makes exports relatively more expensive for foreign buyers, reducing net exports. In addition, higher interest rates in a country can lead to an outflow of capital as investors seek higher returns elsewhere.

An Increase in the Interest Rates in a Country ________