As a result of expansionary monetary policy, lower U.S. interest rates will result in a(n) _____ in the demand for dollars and a(n) _____ in the supply of dollars.

Question

Quizplus · Accepted Answer

When the Federal Reserve implements expansionary monetary policy, it increases the money supply which leads to lower interest rates. Lower interest rates make investing in U.S. assets less attractive, leading to a decrease in demand for dollars. At the same time, the increase in the money supply increases the supply of dollars in circulation. Therefore, expansionary monetary policy leads to a decrease in the demand for dollars and an increase in the supply of dollars.

As a Result of Expansionary Monetary Policy, Lower U