Higher interest rates in a country:
- Effect: Decrease in borrowing and spending.
Lower currency value:
- Effect: Increase in exports.
Higher currency value:
- Effect: More people adopting foreign clothing styles.
Matching each cause with its effect on an economy:
1. Higher interest rates in a country:
- Effect: Decrease in borrowing and spending.
- Explanation: When interest rates are higher, it becomes more expensive for individuals and businesses to borrow money. This leads to a decrease in borrowing and spending, as people are less likely to take out loans or invest in new projects. This can have a cooling effect on the economy.
2. Lower currency value:
- Effect: Increase in exports.
- Explanation: When a country's currency has a lower value compared to other currencies, its exports become cheaper for foreign buyers. This makes the country's goods and services more attractive in the international market, leading to an increase in exports. This can boost the country's economy by stimulating economic activity and creating jobs.
3. Decrease in exports:
- Cause: Higher currency value.
- Explanation: When a country's currency has a higher value compared to other currencies, its exports become more expensive for foreign buyers. This makes the country's goods and services less competitive in the international market, leading to a decrease in exports. This can negatively impact the economy by reducing economic activity and potentially causing job losses.
4. Higher currency value:
- Effect: More people adopting foreign clothing styles.
- Explanation: When a country's currency has a higher value, it can make imported goods, including clothing, more affordable for its residents. This can lead to more people adopting foreign clothing styles as they become accessible and attractive due to their affordability. This effect is more indirect and specific to the clothing industry, but it can contribute to changes in consumer behavior and preferences.