A fall in the domestic money supply of a country should result in which of the following for the value (FX rate) of the domestic currency, holding other factors constant?

Question

Quizplus · Accepted Answer

A decrease in the domestic money supply, all else being equal, typically leads to an appreciation of the domestic currency in the short run. This is because a reduced supply of money increases its value, making the currency stronger compared to foreign currencies.

A Fall in the Domestic Money Supply of a Country