Which of the following is not a result of a temporary fall in foreign demand on one country's exports under floating exchange rate?
A) The DD curve shifts to the left due to reduction of aggregate demand.
B) The AA curve shifts downwards due to reduction of money supply.
C) a fall in aggregate output
D) depreciation in home country's currency
E) a fall in the home interest rate

Question

Quizplus · Accepted Answer

A temporary fall in foreign demand on one country's exports under floating exchange rate would not necessarily lead to a reduction in money supply, which is the reason for the AA curve to shift downwards. The other options are possible outcomes of such a situation.

Which of the Following Is Not a Result of a Temporary