In an open economy, expansionary monetary policy will have the added effect of causing the:
A)exchange rate to depreciate and net exports to increase.
B)exchange rate to depreciate and net exports to decrease.
C)exchange rate to appreciate and net exports to increase.
D)exchange rate to appreciate and net exports to decrease.

Question

Quizplus · Accepted Answer

Expansionary monetary policy involves increasing the money supply and lowering interest rates, leading to an increase in domestic demand. As domestic demand increases, demand for foreign goods also increases, causing the exchange rate to depreciate. This makes exports cheaper and imports more expensive, causing net exports to increase.

In an Open Economy, Expansionary Monetary Policy Will Have the Added