Consider the Monetary Transmission Mechanism in an Open Economy

question 28

Multiple Choice

Consider the monetary transmission mechanism in an open economy. Other things being equal, an increase in the domestic money supply leads to

• A)an appreciation of the domestic currency, thereby stimulating net exports and raising aggregate demand.
• B)an appreciation of the domestic currency, thereby inhibiting net exports and raising aggregate demand.
• C)a depreciation of the domestic currency, thereby inhibiting net exports and raising aggregate demand.
• D)a depreciation of the domestic currency, thereby stimulating net exports and raising aggregate demand.
• E)an appreciation of the domestic currency, thereby stimulating net exports and reducing aggregate demand.