A decrease in the domestic interest rate causes the demand for domestic assets to ________ and the domestic currency to ________,everything else held constant.

Question

Quizplus · Accepted Answer

A decrease in the domestic interest rate makes domestic assets less attractive compared to foreign assets, leading to a decrease in demand for domestic assets. This, in turn, causes the domestic currency to depreciate as investors sell domestic currency to buy foreign assets.

A Decrease in the Domestic Interest Rate Causes the Demand