Suppose that the Federal Reserve enacts expansionary policy. Everything else held constant,this will cause the demand for U.S. assets to ________ and the U.S. dollar to ________.

Question

Quizplus · Accepted Answer

Expansionary policy typically involves lowering interest rates or increasing the money supply, which makes U.S. assets less attractive to investors (decreasing demand for U.S. assets) and leads to a depreciation of the U.S. dollar as investors seek higher returns in other currencies.

Suppose That the Federal Reserve Enacts Expansionary Policy