Lecture 21
INTEREST RATES, EXCHANGE RATES AND NET EXPORTS


1. Exchange rates and Interest rates

2. Exchange rates and Net exports

3. Questions

  1. If the Federal Reserve reduces interest rates in the U.S., the dollar will [appreciate / depreciate], causing net exports to [rise / fall]. Explain.
  2. If the Japanese interest rate rises, the dollar will [strengthen / weaken] relative to the yen.
  3. What are the other factors, in addition to a currency depreciation, that will lead to: