How can

a decreasea$$decrease

in the real interest rate affect a$$ country's net$$ exports?

Part $2$

A$.$

The$$ country's assets become

moremore

$$appealing$,$ causing

an increasean$$increase

in demand for domestic currency. This will cause the nominal and real exchange rates to

appreciateappreciate$,$

reducingreducing

net exports.

B$.$

The$$ country's assets become

lessless

$$appealing$,$ causing

a decreasea$$decrease

in demand for domestic currency. This will cause the nominal and real exchange rates to

depreciatedepreciate$,$

reducingreducing

net exports.

C$.$

The$$ country's assets become

lessless

$$appealing$,$ causing

a decreasea$$decrease

in demand for domestic currency. This will cause the nominal and real exchange rates to

depreciatedepreciate$,$

increasingincreasing

net exports.

D$.$

A change in the real interest rate has no impact on net exports.

a decreasea$$decrease

in the real interest rate affect a$$ country's net$$ exports?

Part $2$

A$.$

The$$ country's assets become

moremore

$$appealing$,$ causing

an increasean$$increase

in demand for domestic currency. This will cause the nominal and real exchange rates to

appreciateappreciate$,$

reducingreducing

net exports.

B$.$

The$$ country's assets become

lessless

$$appealing$,$ causing

a decreasea$$decrease

in demand for domestic currency. This will cause the nominal and real exchange rates to

depreciatedepreciate$,$

reducingreducing

net exports.

C$.$

The$$ country's assets become

lessless

$$appealing$,$ causing

a decreasea$$decrease

in demand for domestic currency. This will cause the nominal and real exchange rates to

depreciatedepreciate$,$

increasingincreasing

net exports.

D$.$

A change in the real interest rate has no impact on net exports.