When interest rates rise, exports _____ and imports _____.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall

Question

Quizplus · Accepted Answer

When interest rates rise, it becomes more expensive for businesses to borrow money to finance their exports. This makes exports more costly, and therefore, less competitive. As a result, exports tend to fall. On the other hand, when interest rates rise, it becomes more attractive for people to save money, which tends to increase the demand for foreign goods. This increase in demand for foreign goods makes imports more expensive and, therefore, tends to lead to an increase in imports.

When Interest Rates Rise, Exports _____ and Imports _____

When Interest Rates Rise, Exports _ and Imports _