Which of the following is likely to occur if the United States enacts a contractionary monetary policy under flexible exchange rates?
A)Interest rates will fall.
B)Inflows of capital will increase.
C)The exchange rate will depreciate.
D)Net exports will not be affected.

Question

Quizplus · Accepted Answer

A contractionary monetary policy typically involves increasing interest rates to reduce inflation and slow economic growth. Higher interest rates make a country's assets more attractive to foreign investors, leading to an increase in capital inflows. This can strengthen the country's currency in a flexible exchange rate system.

Which of the Following Is Likely to Occur If the United