Explain the Link Between U

question 82

Essay

Explain the link between U.S. interest rates, the dollar exchange rate, and net exports. Explain why high interest rates in the United States cause net exports to fall and low interest rates cause net exports to rise?

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Definitions:

Foreign Currencies

Money or other forms of payment used in other countries, distinct from the domestic currency of the home country.

Arbitrage

The practice of taking advantage of price differences in different markets for the same asset, thus earning a profit without any risk.

Triangle Arbitrage

Triangle arbitrage is a risk-free trading strategy that takes advantage of price differences among three currencies in the foreign exchange market.

Exchange Rate

The value at which one form of currency can be swapped for another, impacting overseas trade and investment activities.