In an Open Economy Under Flexible Exchange Rates,expansionary Monetary Policy

question 14

Multiple Choice

In an open economy under flexible exchange rates,expansionary monetary policy that results in an increase in the money supply will always cause

• A)an increase in output.
• B)an increase in exports.
• C)a reduction in the exchange rate, E.
• D)all of the above
• E) only A and C

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Definitions:

Primary Market

The financial market where new securities are issued and sold by companies and governments for the first time.

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership such as options or warrants.

Liquidation Market

A marketplace where assets are sold quickly, often at a discount, typically due to a company's insolvency or urgent liquidation needs.

Secondary Market

This is a market where investors purchase securities or assets from other investors, rather than from issuing companies directly.