The relationship between real interest rates and net exports is
A)positive.
B)not predictable.
C)negative if imports are larger than exports.
D)negative.
E)positive if exports are larger than imports.

Question

Quizplus · Accepted Answer

The relationship between real interest rates and net exports is generally negative. Higher real interest rates make domestic currency investments more attractive, leading to an appreciation of the domestic currency. This makes exports more expensive and imports cheaper, thus reducing net exports.

The Relationship Between Real Interest Rates and Net Exports Is