A contractionary monetary policy would be more effective if it caused:

Question

Quizplus · Accepted Answer

A contractionary monetary policy typically involves increasing interest rates to reduce inflation and slow down economic growth. Higher interest rates make borrowing more expensive, which can lead to a decrease in spending and investment. Additionally, higher interest rates can attract foreign investors looking for higher returns, leading to an appreciation of the domestic currency. An appreciated currency makes exports more expensive and imports cheaper, which can lead to a fall in net exports.

A Contractionary Monetary Policy Would Be More Effective If It