If US interest rates fall,relative to those in Australia,this will tend to _______ net lending by the Americans to Australia and may ________ the equilibrium exchange rate of US dollars to the AUD.

Question

Quizplus · Accepted Answer

When US interest rates fall relative to those in Australia, it becomes more attractive for Americans to lend to Australia where they can get higher returns, thus increasing net lending. Additionally, the increased demand for AUD to invest in Australia appreciates its value, increasing the equilibrium exchange rate of US dollars to the AUD.

If US Interest Rates Fall,relative to Those in Australia,this Will