A contractionary 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 downward pressure on interest rates causing the currency to depreciate.
E) None of the above

Question

Quizplus · Accepted Answer

A contractionary monetary policy typically involves reducing the money supply or raising interest rates, which makes borrowing more expensive. This tends to attract foreign investors seeking higher returns, leading to an appreciation of the domestic currency.

A Contractionary Monetary Policy