According to monetary transmission mechanism in the short-run, increase in money supply in an economy leads to:
A) lower value of domestic currency.
B) higher value of domestic currency.
C) lower net exports.
D) higher imports.

Question

Quizplus · Accepted Answer

An increase in money supply typically leads to lower interest rates, which can cause the domestic currency to depreciate, resulting in a lower value of the domestic currency.

According to Monetary Transmission Mechanism in the Short-Run, Increase in Money