How Does Contractionary Monetary Policy Affect Interest Rates and Net

question 65

Multiple Choice

How does contractionary monetary policy affect interest rates and net exports in an open economy?

• A)Contractionary monetary policy increases exports and reduces imports because of higher interest rates.
• B)Contractionary monetary policy reduces exports and increases imports because of higher interest rates.
• C)Contractionary monetary policy increases exports and increases imports because of lower interest rates.
• D)Contractionary monetary policy reduces exports and reduces imports because of lower interest rates.

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Definitions:

Gallon

A unit of volume measurement in the U.S. customary units and the British imperial systems, used primarily for measuring liquids.

Gasoline

A fuel derived from petroleum, used primarily in internal combustion engines.

Smokestack Scrubber

Pollution control devices that remove or neutralize hazardous components from industrial exhaust streams, often used in power plants.

Government Policy

Strategies and measures adopted by a government to achieve certain goals in national and international affairs.