A contractionary monetary policy raises the real interest rate,causing the domestic currency to ________,thereby ________ net exports.
A)appreciate;raising
B)appreciate;lowering
C)depreciate;raising
D)depreciate;lowering

Question

Quizplus · Accepted Answer

A contractionary monetary policy, by raising the real interest rate, makes the domestic currency appreciate as investors seek the higher returns available in that country. This appreciation makes domestic goods more expensive to foreigners, thus lowering net exports.

A Contractionary Monetary Policy Raises the Real Interest Rate,causing the Domestic