When the Fed lowers the interest rate:
A) investment increases, and net exports decreases.
B) both investment and net exports increase.
C) both investment and net exports decrease.
D) investment decreases, and net exports increase.

Question

Quizplus · Accepted Answer

When the Fed lowers the interest rate, borrowing becomes cheaper, leading to an increase in investment spending. Additionally, a lower interest rate decreases the value of a country's currency, making exports cheaper and more attractive to foreign buyers, which increases net exports.

When the Fed Lowers the Interest Rate