When the Fed is pursuing contractionary monetary policy it will tend to depreciate the value of the dollar and hence increase net exports, other things equal.

Question

Quizplus · Accepted Answer

When the Fed is pursuing contractionary monetary policy, it usually raises interest rates, which in turn increases the value of the dollar as investors seek higher returns. This makes exports more expensive and reduces net exports, other things equal.

When the Fed Is Pursuing Contractionary Monetary Policy It Will