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:

Specific Performance

A legal remedy requiring a party to execute a contract according to its precise terms.

Breach

The violation or non-fulfillment of a legal obligation, contract, or agreement.

Sale of Land

The legal process in which the ownership of immovable property is transferred from one party to another.

Invalid

Not legally or factually sound; without force or effect.