Figure 12.5

Panel (a) Panel (b)
-Refer to Figure 12.5.If exchange rates are floating,an expansionary monetary policy would best be represented by a movement from ________ in panel (a) and a corresponding movement from ________ in panel (b) .

Question

Figure 12.5

Panel (a) Panel (b)
-Refer to Figure 12.5.If exchange rates are floating,an expansionary monetary policy would best be represented by a movement from ________ in panel (a) and a corresponding movement from ________ in panel (b) .

Quizplus · Accepted Answer

An expansionary monetary policy would lead to a depreciation of the domestic currency, which is represented by a movement from point A to point B in panel (a). This would also lead to a decrease in the foreign interest rate, which is represented by a movement from point X to point Y in panel (b).

Figure 12.5 &Ensp; Panel (A) &Ensp; Panel (B)