Easy monetary policy reduces the real interest rate, which ________ the demand for dollars, ________ the supply of dollars, and ________ the equilibrium value of the dollar.
A)increases; increases; increases
B)decreases; decreases; decreases
C)increases; decreases; increases
D)decreases; increases; decreases

Question

Quizplus · Accepted Answer

U.S interest rates fall during easy monetary policy and U.S. investments become less attractive to foreign investors, which decreases demand for dollars on foreign exchange markets. At the same time, easy monetary policy increases the supply of dollars and, therefore, decreases the equilibrium value of the dollar.

Easy Monetary Policy Reduces the Real Interest Rate, Which ________