If a Country with Floating Exchange Rates Uses an Expansionary

question 348

Multiple Choice

If a country with floating exchange rates uses an expansionary monetary policy, the domestic interest rate _____, demand for the domestic currency _____, supply of the domestic currency _____, and the effect on the exchange rate is _____.

• A) falls; falls; rises; ambiguous
• B) rises; rises; falls; an increase
• C) falls; falls; rises; a decrease
• D) falls; remains unchanged; rises; a decrease

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