A contractionary monetary policy would be effective if it causedQuestion 15Select one:a.interest rates to increase, leading to an exchange rate appreciation and a fall in net exports.b.interest rates to decrease, leading to an exchange rate appreciation and a fall in net exports.c.interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports.d.interest rates to increase, leading to an exchange rate depreciation and a rise in net exports.
Question
A contractionary monetary policy would be effective if it causedQuestion 15Select one:a.interest rates to increase, leading to an exchange rate appreciation and a fall in net exports.b.interest rates to decrease, leading to an exchange rate appreciation and a fall in net exports.c.interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports.d.interest rates to increase, leading to an exchange rate depreciation and a rise in net exports.
Solution
The correct answer is a. interest rates to increase, leading to an exchange rate appreciation and a fall in net exports.
Here's why:
-
Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. The tools are increasing the reserve requirement, increasing the discount rate, and selling securities on the open market. All of these actions reduce the amount of money in the economy, leading to a decrease in demand, which slows inflation.
-
When a central bank increases
Similar Questions
Contractionary monetary policy:Question 33Select one:a.deals with reduced government spending and/or increased taxes.b.results in increased domestic farm prices, export prices, and input prices.c.deals with increasing government spending and/or decreasing tax rates.d.deals with increasing money supply in the economy and/or decreasing interest rates.e.deals with decreasing money supply in the economy and/or increasing interest rates.
Which economic tool would most likely be used as part of a contractionary monetary policy?A.Lowering interest on reservesB.Reducing the discount rateC.Raising the reserve requirementD.Buying treasury securitiesSUBMITarrow_backPREVIOUS
The Federal Reserve would most likely adopt a contractionary monetary policy in which economic situation?A.The country has a high unemployment rate and slow economic growth.B.The country has a low inflation rate and weak economic growth.C.The country has a high inflation rate and rapid economic growth.D.The country has a low unemployment rate and steady economic growth.
The openness of the economy and flexible exchange ratesGroup of answer choicesincrease the effectiveness of a contractionary monetary policy, but reduce the effectiveness of an expansionary monetary policy.reduce the effectiveness of both expansionary and contractionary monetary policies.increase the effectiveness of both expansionary and contractionary monetary policies.increase the effectiveness of an expansionary monetary policy, but reduce the effectiveness of a contractionary monetary policy.
The implementation of a contractionary policy by the Federal Reserve would result in:Question 3Answera.increased spendingb.increased economic growthc.lower interest ratesd.lower unemploymente.lower inflation
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.