Which of the following is part of the explanation of why net exports are correlated with interest rates?
A) An increase in domestic interest rates discourages foreign lending.
B) A reduction in foreign lending drives up the value of the domestic currency.
C) An increase in the value of the domestic currency increases the demand for foreign goods.
D) An increase in the demand for foreign goods causes an immediate increase in net exports.
E) None of the above is both an accurate statement and part of an explanation of the correlation between net exports and interest rates.
Correct Answer:
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