If a central bank was to prevent its currency from appreciating, it would likely adopt a (an) ______ monetary policy to ______ the domestic interest rate, thus strengthening its currency.
A) contractionary, decrease
B) contractionary, increase
C) expansionary, decrease
D) expansionary, increase

Question

Quizplus · Accepted Answer

Expansionary monetary policy is used to decrease the domestic interest rate, which can help prevent a currency from appreciating by making investments in that currency less attractive, thus reducing the demand for the currency.

If a Central Bank Was to Prevent Its Currency from Appreciating