will happen to an economy when inflation remains constant, with high interest rates? a) Imports to decrease. b) Foreign investment in that country increase. c) The foreign trade deficit remains constant. d) The value of the dollar would depreciate relative to foreign currencies

will happen to an economy when inflation remains constant, with high interest rates? a) Imports to decrease. b) Foreign investment in that country increase. c) The foreign trade deficit remains constant. d) The value of the dollar would depreciate relative to foreign currencies

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 5E

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Question

What will happen to an economy when inflation remains constant, with high interest rates?
a) Imports to decrease.
b) Foreign investment in that country increase.
c) The foreign trade deficit remains constant.
d) The value of the dollar would depreciate relative to foreign currencies.

Definition Definition Situation in which a country spends more on imports than it makes through exports. When a trade deficit exists, net exports will be negative. Trade Deficit = (Imports) - (Exports)

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Step 1: Define Foreign investment

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Step 2: When inflation remains constant, with high interest rates, the correct statement is:

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Step 3: Now let's explain why the other options are not correct:

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