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Interest rates question watch

    • Thread Starter

    IS there a link between lower interest rates and an increase in exports?!

    So, if the BOE were to lower interest rates, then would this discourage foreigners to put their money into british banks because of the decreased returns of doing so? Therefore, there wouldn't be as much hot money flowing into the UK economy from foreign countries and this would cause a depreciation in the currency, meaning that exports would now be less expensive for foreigners to buy, and imports would be more expensive? ... So exports would increase and as a result Aggregate demand would also increase, shifting the curve out to the right???
    or am i wrong?

    Help if you can, cheers!

    You are right, If it causes the pound to depreciate it would cost less to get the pound. As a result the pound will be cheaper which will make buying stuff cheaper and selling stuff more expensive, However from my understanding it is a bloody great risk that the entire country would have to take.
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Updated: May 16, 2013
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