Question

If the Fed lowers the interest​ rate, then A. only consumption expenditure decreases. B. only investment decreases. C. consumption expenditure decreases and investment increases. D. net exports will increase. E. both consumption expenditure and investment decrease.

Answer 1

Answer: D. net exports will increase.

Explanation:

Lower interest rates decrease the value of a currency because less investors will invest in it. This reduced currency value will mean that exports will become cheaper as they are quoted in the domestic currency. As the exports are cheaper, more countries will buy them leading to an increase in Net exports.