An expansionary monetary policy would be more effective if it caused:

Question

Quizplus · Accepted Answer

An expansionary monetary policy involves increasing the money supply which lowers interest rates. When interest rates decrease, it makes the domestic currency less attractive and thus leads to a depreciation in the exchange rate. This, in turn, makes exports cheaper and imports more expensive which leads to a rise in net exports. Therefore, choice C is the best option as it describes the most effective outcome of an expansionary monetary policy.

An Expansionary Monetary Policy Would Be More Effective If It