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Hello, I am doing some practice questions before I start my semester next week. I am...

Hello, I am doing some practice questions before I start my semester next week. I am struggling with this problem. It is a fill in the blank, I'm almost positive that the second BLANK is going down but I'm not sure.

Suppose European union fiscal policymakers began practicing a more contractionary fiscal policy. This would probably lead the euro to BLANK against the dollar and then net exports of the USA would BLANK.

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Answer #1

Rise

The euro will RISE against the dollars due to increase in the rate of interest and lower cash amongst the public as a result of contractionary fiscal policy.

Rise

Due to increase in the value of euro as compared to dollar, euro currency will become stronger enough to purchase more and import more.

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