If the Fed buys government securities, other things the same, the exchange rate ________ and U.S.exports ________.
A) rises; increase
B) rises; decrease
C) falls; increase
D) falls; decrease
E) falls; do not change because they are autonomous expenditure

Question

Quizplus · Accepted Answer

When the Fed buys government securities, it increases the money supply, leading to lower interest rates. Lower interest rates typically cause the exchange rate to fall, making U.S. goods cheaper for foreign buyers and thus increasing exports.

If the Fed Buys Government Securities, Other Things the Same