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Course: Macroeconomics > Unit 6

Lesson 5: Real interest rates and international capital flows

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Changes in the foreign exchange markets and net exports

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The central bank of Johnsrudia engaged in contractionary monetary policy that lead to an increase in interest rates.

What will happen to the value of Johnsrudia’s currency, its imports, and its exports?

(Choice A)
Currency appreciates; imports increase; exports increase
(Choice B)
Currency depreciates; imports decrease; exports decrease
(Choice C)
Currency appreciates; imports decrease; exports increase
(Choice D)
Currency depreciates; imports increase; exports increase
(Choice E)
Currency appreciates; imports increase; exports decrease