The following best describes the relationship between monetary policy and net exports: $\uparrow _ { i } \Rightarrow \downarrow R \Rightarrow \downarrow \frac { E P } { p ^ { w } } \Rightarrow \downarrow \frac { E X } { \bar { Y } }$
and $\uparrow \frac { L M } { \bar { Y } } \Rightarrow \downarrow \frac { N X } { \bar { Y } }$
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Question

The following best describes the relationship between monetary policy and net exports: $\uparrow _ { i } \Rightarrow \downarrow R \Rightarrow \downarrow \frac { E P } { p ^ { w } } \Rightarrow \downarrow \frac { E X } { \bar { Y } }$ 
and $\uparrow \frac { L M } { \bar { Y } } \Rightarrow \downarrow \frac { N X } { \bar { Y } }$ 
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Quizplus · Accepted Answer

The relationship described is incorrect. An increase in interest rates ($\uparrow _ { i }$) typically leads to an appreciation of the domestic currency ($\uparrow R$), making exports more expensive and imports cheaper, which can decrease net exports ($\downarrow \frac { N X } { \bar { Y } }$).

The Following Best Describes the Relationship Between Monetary Policy and Net