An increase in the interest rate should ________ the demand for dollars and the value of the dollar,and net exports should ________.
A)decrease; decrease
B)decrease; increase
C)increase; decrease
D)increase; increase
E)increase; not change

Question

Quizplus · Accepted Answer

An increase in the interest rate should increase the demand for dollars as investors seek to earn a higher return on their investments in US securities, leading to an increase in the value of the dollar. However, this increase in the value of the dollar should make US exports more expensive and less competitive, causing a decrease in net exports.

An Increase in the Interest Rate Should ________ the Demand