In the short run, the net effect of an expansionary monetary policy is a lower trade deficit.

Question

Quizplus · Accepted Answer

Expansionary monetary policy typically leads to lower interest rates, which can increase domestic consumption and investment but also lead to a depreciation of the currency. This can increase the cost of imports and potentially increase exports, but the immediate effect often includes increased imports due to higher domestic demand, potentially widening the trade deficit in the short run.

In the Short Run, the Net Effect of an Expansionary