For This Question,assume That Exchange Rates Are Flexible and That

question 61

Multiple Choice

For this question,assume that exchange rates are flexible and that the exchange rate expected to occur in one year is not constant.Suppose that individuals now expect that the foreign central bank will pursue expansionary monetary policy in one year.This expected future monetary expansion by the foreign central bank will cause which of the following to occur?

• A)The current nominal exchange rate will decrease.
• B)The current nominal exchange rate will increase.
• C)The current nominal exchange rate will not change.
• D)The effects on the current nominal exchange rate are ambiguous.

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