Figure 29-1
-Refer to Figure 29-1. Suppose that the U.S. government deficit causes interest rates in the United States to rise relative to those in the European Union. Assuming all else remains constant, how would this be represented?
A) Supply would decrease, demand would decrease and the economy moves from B to C to D.
B) Supply would increase, demand would decrease and the economy moves from C to B to A.
C) Demand would increase and the economy moves from A to B.
D) Demand would decrease and the economy moves from B to A.

Question

Figure 29-1 
-Refer to Figure 29-1. Suppose that the U.S. government deficit causes interest rates in the United States to rise relative to those in the European Union. Assuming all else remains constant, how would this be represented?
A) Supply would decrease, demand would decrease and the economy moves from B to C to D. 
B) Supply would increase, demand would decrease and the economy moves from C to B to A. 
C) Demand would increase and the economy moves from A to B. 
D) Demand would decrease and the economy moves from B to A.

Quizplus · Accepted Answer

Higher interest rates in the U.S. make U.S. assets more attractive, increasing demand for the U.S. dollar, moving the economy from A to B.

Figure 29-1 -Refer to Figure 29-1. Suppose That the U.S. Government Deficit