An expansionary monetary policy:
A) puts upward pressure on interest rates causing the currency to appreciate.
B) puts upward pressure on interest rates causing the currency to depreciate.
C) puts downward pressure on interest rates causing the currency to appreciate.
D) puts no pressure on interest rates and does not change the exchange rate.
E) puts downward pressure on interest rates causing the currency to depreciate.

Question

Quizplus · Accepted Answer

An expansionary monetary policy typically involves the central bank increasing the money supply, which leads to lower interest rates. Lower interest rates make a country's financial assets less attractive to foreign investors, leading to a depreciation of the currency as demand for it decreases.

An Expansionary Monetary Policy