A tight monetary policy might cause

Question

Quizplus · Accepted Answer

Tight monetary policy, which involves higher interest rates, tends to reduce domestic demand for goods and services and may lead to a decrease in imports. However, it also increases the value of the domestic currency, making exports more expensive and less competitive in foreign markets. This could lead to a decline in exports and a deterioration of the international trade balance, as fewer foreign buyers are willing to purchase goods from the country. Other countries may also respond to the tighter policy by pursuing their expansionary monetary policy to offset any negative impacts on their own economies.

A Tight Monetary Policy Might Cause