To temporarily offset a depreciation in the dollar's exchange value, the Federal Reserve could cause a(n) ______ in the U.S. money supply that would promote a(n) ______ in U.S. interest rates and a(n) ______ in investment flows to the U.S.

Question

Quizplus · Accepted Answer

By decreasing the U.S. money supply, the Federal Reserve would cause U.S. interest rates to increase, making U.S. assets more attractive to foreign investors, thereby increasing investment flows to the U.S. and supporting the dollar's exchange value.

To Temporarily Offset a Depreciation in the Dollar's Exchange Value