The relationship between consumption, investment and net export expenditures and the interest rate is expected to be:

Question

Quizplus · Accepted Answer

The relationship between consumption, investment, and net export expenditures and the interest rate is generally negative. Higher interest rates make borrowing more expensive, which can reduce consumption and investment. For net exports, higher domestic interest rates can appreciate the currency, making exports more expensive and imports cheaper, potentially reducing net exports.

The Relationship Between Consumption, Investment and Net Export Expenditures and the Interest