Suppose that a country has floated its currency and the central bank sets an expansionary monetary policy. Which outcome is likely to occur?

Question

Quizplus · Accepted Answer

An expansionary monetary policy typically involves the central bank increasing the money supply, which leads to lower interest rates. Lower interest rates make investments in that country less attractive, leading to capital outflow as investors seek higher returns elsewhere.

Suppose That a Country Has Floated Its Currency and the Central