"Under the monetary approach to exchange rate,a rise in domestic money supply will cause a depreciation of domestic currency."

Question

Quizplus · Accepted Answer

According to the monetary approach to exchange rate, an increase in the domestic money supply will lead to an increase in the supply of domestic currency in the foreign exchange market, causing the exchange rate to fall, i.e., a depreciation of the domestic currency. Conversely, a decrease in the domestic money supply would lead to an appreciation of the domestic currency.

"Under the Monetary Approach to Exchange Rate,a Rise in Domestic