Contractionary monetary policy will lower a country\'s interest rates and cause

Question

Contractionary monetary policy will

lower a country's interest rates and cause is currency to depreciate.

raise a country's interest rates and cause its currency to appreciate.

lower a country's interest rates and cause is currency to appreciate.

raise a country's interest rates and cause is currency to depreciate.

lower a country's interest rates and cause is currency to depreciate.

raise a country's interest rates and cause its currency to appreciate.

lower a country's interest rates and cause is currency to appreciate.

raise a country's interest rates and cause is currency to depreciate.

Explanation / Answer

The answer is B-) Raises a country's interest rate and cause its currency to appreciate.

because, when the contractionary monetary policy takes place, the money supply reduced, which increase the interest rate and thus decrease the aggregate demand in the economy . and therefore i will lead to decrease in the price level in the economy. hence , domestic products becomes cheaper for the foreign country and therefore exports will increase and then curreny will appreciate.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.