Figure 19-6
-Refer to Figure 19-6.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?

Question

Figure 19-6 
-Refer to Figure 19-6.Suppose that the U.S.government deficit causes interest rates in the United States to rise relative to those in the European Union.Assuming all else remains constant,how would this be represented?

Quizplus · Accepted Answer

An increase in U.S. interest rates would attract foreign capital, increasing demand for the U.S. dollar and decreasing supply as fewer dollars are exchanged for foreign currency. This would move the economy from A to D to C.

Figure 19-6 -Refer to Figure 19-6.Suppose That the U.S.government Deficit Causes Interest