An open market sale by the Fed causes the value of the dollar to
A) rise, increasing net exports.
B) rise, reducing net exports.
C) fall, increasing net exports.
D) fall, reducing net exports.

Question

Quizplus · Accepted Answer

An open market sale by the Fed reduces the money supply, which tends to increase interest rates. Higher interest rates attract foreign capital, increasing the demand for the dollar and causing its value to rise. A stronger dollar makes U.S. goods more expensive abroad and foreign goods cheaper in the U.S., thus reducing net exports.

An Open Market Sale by the Fed Causes the Value