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QUESTION 52 A decrease in U.S. interest rates leads to a. a depreciation of the dollar...

QUESTION 52

  1. A decrease in U.S. interest rates leads to

    a.

    a depreciation of the dollar that leads to smaller net exports.
    b.

    a depreciation of the dollar that leads to greater net exports.
    c.

    an appreciation of the dollar that leads to greater net exports.
    d.

    an appreciation of the dollar that leads to smaller net exports.

1 points   

QUESTION 53

  1. As the price level falls,

    a.

    the exchange rate rises, so net exports fall.
    b.

    the exchange rate rises, so net exports rise.
    c.

    the exchange rate falls, so net exports fall.
    d.

    the exchange rate falls, so net exports rise.
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Answer #1

Q52) correct option - b. a depreciation of the dollar that leads to greater net exports.

lower interest rates tend to be unattractive for foreign investment and decrease the currency's relative value.

As the value of U.S decrease it's export becomes attractive for world. Therefore, export will increase.

Q53) correct option - a. the exchange rate rises, so net exports fall.

As the price decreases it increase the demnd of goods which will increase the demand of domestic currency which will appreciate the currency thus, exchange rate will rise, and as the exchange rate rise net export will fall.

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