Other things equal, a decrease in the US interest rate a. Induces firms to invest more...
Other things equal, a decrease in the US interest rate
a. Induces firms to invest more
b. Shifts money demand left
c. Makes the US dollar appreciate
d. Increases the opportunity cost of holding dollars
Homework Answers
ANswer
Option a
a. Induces firms to invest more
The decrease in the interest rate in the US increases the investment and consumption spending in the economy as the opportunity cost of the holding money decreases. the decrease in interest rate decreases foreign investments in the country so the dollar depreciates as the demand for dollars decreases and it is a movement along the money demand curve.
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