Which of the following would you expect to increase both interest rates and exchange rates?
A)expansionary monetary policy
B)contractionary monetary policy
C)expansionary fiscal policy
D)contractionary fiscal policy
E)Both B and C will increase both interest rates and exchange rates.

Question

Quizplus · Accepted Answer

Contractionary monetary policy (choice B) typically increases interest rates to reduce inflation and slow economic growth, which can attract foreign capital and increase the exchange rate. Expansionary fiscal policy (choice C) increases government spending or decreases taxes, which can lead to higher interest rates due to increased demand for funds and potentially a higher exchange rate if it leads to increased foreign investment.

Which of the Following Would You Expect to Increase Both