*37. Refer to the diagram to the right. Suppose that the U.S government deficit

Question

*37. Refer to the diagram to the right. Suppose that the U.S government deficit causes interest rates in the United States to rise relative to those in the European Union. Assuming all else remains constant, how would this be represented? O A. Demand would increase and the economy moves from A to B. O B. Supply would decrease, demand would decrease, and the economy moves from B to C to D. economy moves from B to A. decrease, and the economy moves from O C. Demand would decrease and the O D. Supply would increase, demand would C to B to A. Quantity of $ traded

Explanation / Answer

An increased interest rate will attract funds from the EU and other areas increasing the demand and shifting the demand curve. It will increase the quantity produced from point A to point B.

The answer is "A".

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