The Monetary Transmission Mechanism in an OPEN Economy Is More

question 61

Multiple Choice

The monetary transmission mechanism in an OPEN economy is more complicated than it is in a closed economy because the effects of domestic monetary contraction or expansion are

• A)strengthened because domestic interest rates must be equal to those in the rest of the world.
• B)weakened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world.
• C)strengthened because changes in autonomous expenditure cause monetary effects that influence interest rates in the rest of the world.
• D)strengthened because changes in the domestic money supply cause changes in the exchange rate,which then reinforce the changes in desired investment.
• E)weakened because changes in the domestic money supply cause changes in the exchange rate which then offset the changes in desired investment.

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Definitions:

Selling For

This term typically refers to the price at which an item or service is being offered for sale to customers.

Current Yield

The annual income (interest or dividends) derived from an investment, expressed as a percentage of the current price of the security.

Coupon Payment

A regular interest distribution to those holding bonds, often disbursed twice a year.

Market Price

The current price at which an asset or service is bought or sold in a marketplace.