Unanticipated Expansionary Monetary Policy Will Increase Economic Growth and Push

question 15

Multiple Choice

Unanticipated expansionary monetary policy will increase economic growth and push inflation upward while lowering real interest rates. This will cause

• A) an increase in the demand for foreign currencies and a decline in the foreign exchange value of the dollar.
• B) a decrease in the demand for foreign currencies and a decline in the foreign exchange value of the dollar.
• C) an increase in the demand for foreign currencies and an increase in the foreign exchange value of the dollar.
• D) a decrease in the demand for foreign currencies and an increase in the foreign exchange value of the dollar.

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Definitions:

Equilibrium Price

The price point in the market at which the amount of goods being offered is equal to the amount of goods being sought.

Quantity Supplied

The volume of a commodity or service that sellers are ready and capable of providing at a specific price within a given period.

Surplus

An excess of production or supply over demand, often resulting in lower prices.

Cutting

The act or process of reducing something in size, amount, or extent.