The impact of monetary policy through exchange rates tends to ________ the impact of monetary policy through real interest rates.
A)reinforce
B)contradict
C)totally negate
D)be exactly the same as

Question

Quizplus · Accepted Answer

Flexible exchange rates mean domestic monetary policy is reinforced in foreign transactions. For example, if easy monetary policy lowers domestic interest rates, this stimulates GDP growth. Additionally, lower interest rates discourage foreign capital investment, which weakens the dollar and encourages exports.

The Impact of Monetary Policy Through Exchange Rates Tends to ________