A contractionary monetary policy decreases net exports by ________ interest rates and ________ the value of the dollar.
A)lowering real;decreasing
B)lowering real;increasing
C)raising nominal;increasing
D)raising real;increasing

Question

Quizplus · Accepted Answer

A contractionary monetary policy raises real interest rates, which attracts foreign capital, increasing demand for the dollar and thus increasing its value. This makes exports more expensive and imports cheaper, reducing net exports.

A Contractionary Monetary Policy Decreases Net Exports by ________ Interest