In an Open Economy with Flexible Exchange Rates, Monetary Policy

question 101

Multiple Choice

In an open economy with flexible exchange rates, monetary policy affects consumption and investment by changing the ________ and affects net exports by changing the ________.

• A)inflation rate; unemployment rate
• B)exchange rate; real interest rate
• C)growth of domestic real GDP; growth of foreign real GDP
• D)real interest rate; exchange rate

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Definitions:

Credit Card

A payment card issued by financial institutions that allows the cardholder to borrow funds for purchases or cash advances, subject to a line of credit.

Loan Issuer

An entity, such as a bank or financial institution, that provides loans to borrowers under agreed terms and conditions.

Debit Cards

A payment card that deducts money directly from a consumer's checking account to pay for a purchase, unlike credit cards which borrow money that must be repaid.

U.S. Mint

A bureau of the Department of the Treasury responsible for producing coinage for the United States.