With the Foreign Interest Rate in the IS Model, an Increase

Multiple Choice

With the foreign interest rate in the IS model, an increase in the domestic interest rate causes ________ because ________.

A) leftward movement along the IS curve; it leads to appreciation of the domestic real exchange rate and causes domestic investment to fall
B) leftward movement along the IS curve; domestic investment rises
C) the IS curve to shift left; it leads to appreciation of the domestic real exchange rate and causes domestic investment to fall
D) the IS curve to shift left; it leads to depreciation in the domestic real exchange rate and causes a decline in domestic investment
E) the IS curve to shift right; it leads to appreciation in the domestic real exchange rate