Holding All Else Constant, Higher Interest Rates in the United

question 117

Multiple Choice

Holding all else constant, higher interest rates in the United States would

• A) decrease the demand for U.S. dollars in the foreign exchange market. In turn, this will lead to a decrease in the exchange rate, and subsequently, U.S. net exports would rise.
• B) increase the demand for U.S. dollars in the foreign exchange market. In turn, this will lead to an increase in the exchange rate, and subsequently, U.S. net exports would fall.
• C) increase the demand for U.S. dollars in the foreign exchange market. In turn, this will lead to a decrease in the exchange rate, and subsequently, U.S. net exports would rise.
• D) decrease the demand for U.S. dollars in the foreign exchange market. In turn, this will lead to an increase in the exchange rate, and subsequently, U.S. net exports would fall.

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Definitions:

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