Other things the same,an increase in the price level causes the interest rate to
A)increase,the dollar to depreciate,and net exports to increase.
B)increase,the dollar to appreciate,and net exports to decrease.
C)decrease,the dollar to depreciate,and net exports to increase.
D)decrease,the dollar to appreciate,and net exports to decrease.

Question

Quizplus · Accepted Answer

An increase in the price level causes inflation, which leads to an increase in the interest rate. This, in turn, attracts foreign investments and leads to an appreciation of the currency. As the currency appreciates, net exports decrease as exports become more expensive for foreign buyers. Therefore, an increase in the price level causes the interest rate to increase, the dollar to appreciate, and net exports to decrease.

Other Things the Same,an Increase in the Price Level Causes