Assume that the US economy expands and that the US Federal Reserve Bank, worried by rising inflation, decides to raise interest rates. Which of the following would not occur?

Question

Quizplus · Accepted Answer

When the US Federal Reserve raises interest rates, it typically leads to an appreciation of the US dollar and can cause capital to flow into the US from other countries seeking higher returns. This can put upward pressure on interest rates in other countries as they might raise rates to prevent capital outflows or to maintain the attractiveness of their own currencies. Therefore, it is not expected that interest rates in other countries will fall as a direct consequence of the Fed raising rates.

Assume That the US Economy Expands and That the US