Suppose the government cuts taxes.We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets.
A)rise; appreciate
B)rise; depreciate
C)fall; depreciate
D)fall; appreciate

Question

Quizplus · Accepted Answer

When the government cuts taxes, it typically leads to increased consumer spending and investment, which can drive up demand for money and lead to higher interest rates. Additionally, higher interest rates can attract foreign investors looking for better returns, which can lead to an appreciation of the dollar in foreign exchange markets.

Suppose the Government Cuts Taxes