When the United States raises interest rates, it tends to have consequences for countries around the...
When the United States raises interest rates, it tends to have consequences for countries around the world. what are some of the consequences?
Homework Answers
When the United States raises the rate of interest then it has consequences all over the world. This is because it leads to net capital outflow from other nations and net capital inflow into the United States because return on investment rises in United States. Thus, Foreign Portfolio Investors will withdraw their money from these nations and park their money in United States which reduces their economic growth rate. Also it reduces overall aggregate demand in United States and thus real GDP falls which leads to fall in the level of Net exports as income falls and thus demand for goods manufactured by other countries or exports in United States fall. Thus, it has global consequences.
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When the United States raises interest rates, it tends to have
consequences for countries around the...
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