Which of the following would you expect to decrease both interest rates and exchange rates? (Assume exchange rates are stated in terms of foreign currency per domestic currency.)
A)contractionary monetary policy
B)expansionary monetary policy
C)contractionary fiscal policy
D)expansionary fiscal policy
E)Both B and C will decrease both interest rates and exchange rates.

Question

Quizplus · Accepted Answer

Expansionary monetary policy typically involves the central bank increasing the money supply and lowering interest rates, which can lead to a depreciation of the domestic currency (lower exchange rate). Contractionary fiscal policy, which involves reducing government spending or increasing taxes, can decrease demand in the economy, leading to lower interest rates and potentially a lower exchange rate as well, as it might reduce inflationary pressures.

Which of the Following Would You Expect to Decrease Both