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Which of the Following Best Describes the Exchange Rate Monetary

Question 65

Multiple Choice

Which of the following best describes the exchange rate monetary transmission mechanism?

A) A rise in the money supply causes a fall in interest rates; this causes a fall in the exchange rate; this causes a rise in exports and a fall in imports; this causes a multiplied rise in national income.
B) A rise in the money supply causes a rise in interest rates; this causes a rise in the exchange rate; this causes a rise in exports and a fall in imports; this causes a multiplied rise in national income.
C) A rise in the money supply causes a rise in interest rates; this causes a fall in the exchange rate; this causes a fall in exports and a rise in imports; this causes a multiplied fall in national income.
D) A rise in the money supply causes a fall in interest rates; this causes a rise in the exchange rate; this causes a fall in exports and a rise in imports; this causes a multiplied fall in national income.
E) A rise in the money supply causes a fall in interest rates; this causes a fall in the exchange rate; this causes a fall in exports and a rise in imports; this causes a multiplied rise in national income.

Correct Answer: