If,other things being equal,a country with a flexible exchange rate decreases its money supply,this will lead to _____ in the value of the country's currency,which will tend to _____ national income.
A) a depreciation; increase
B) a depreciation; decrease
C) an appreciation; increase
D) an appreciation; decrease

Question

Quizplus · Accepted Answer

When a country with a flexible exchange rate decreases its money supply, it will lead to an appreciation in the value of the country's currency. This is because with less money in circulation, each unit of currency becomes more valuable. However, this appreciation will tend to decrease national income, as it makes exports more expensive and reduces demand for the country's goods and services in the international market.

If,other Things Being Equal,a Country with a Flexible Exchange Rate