In a Large Open Economy with a Floating Exchange Rate

question 31

Multiple Choice

In a large open economy with a floating exchange rate, such as in the United States, in the short run a monetary contraction:

• A)raises the interest rate and lowers investment and income, but does not affect the exchange rate.
• B)raises the exchange rate and lowers net exports and income, but does not affect the interest rate.
• C)initially raises the exchange rate, causing arbitrageurs to sell dollars and return the money supply to its initial level.
• D)raises the interest rate and lowers investment and income, but also raises the exchange rate and lowers net exports.

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Definitions:

Trivialization Strategy

A tactic used to minimize or reduce the perceived importance of an issue or event.

Smoking Behavior

Patterns and habits related to the consumption of tobacco products, influenced by a combination of psychological, social, and biological factors.

Littering Behavior

This refers to the actions or tendencies of individuals to dispose of waste materials improperly in public places, leading to environmental pollution and degradation.

High Choice Condition

A situation where individuals are presented with several options, allowing for a high degree of autonomy in making a decision.