Use the Following to Answer Questions

question 72

Multiple Choice

Use the following to answer questions .
Exhibit: Effects of Monetary Policy
-(Exhibit: Effects of Monetary Policy) In Panel (b) , assume that the price of bonds rises from P₁ to P₂. Now, in Panel (c) , the higher price of bonds will

• A) reduce the demand for and increase the supply of dollars and cause the exchange rate to increase.
• B) reduce the demand for and increase the supply of dollars and cause the exchange rate to rise.
• C) increase the demand for and reduce the supply of dollars and cause the exchange rate to increase.
• D) reduce the demand for and increase the supply of dollars and cause the exchange rate to fall.

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